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Alba Iulia
Sunday, May 31, 2020

Measures announced by BOZ are disjointed, impractical, vague and merely intended to give a false perception

Economy Measures announced by BOZ are disjointed, impractical, vague and merely intended...

Patriots for Economic Progress President Sean Tembo says he has noted with much consternation the statement that was issued by the Bank of Zambia regarding measures intended to stimulate the Zambian economy in view of the COVID-19 pandemic.

Mr Tembo says the measures that have been announced by BOZ are disjointed, impractical, vague and merely intended to give a false perception that BOZ is doing something about the current economic situation when in fact not.

He said the first measure announced by the Bank of Zambia was that it has set up a medium-term refinancing facility of K10 billion to be accessed by financial service providers in Zambia which is not a genuine measure because before BOZ can talk about lending money to financial service providers as a way of mitigating the economic impact of COVID-19 as they should first of all pay back all the money the Government owes these financial service providers in unremitted loan deductions from civil servants done at PMEC which are currently estimated at K2 billion.

Mr Tembo said it is hypocritical of Government to talk about lending money to institutions that they owe money instead of firstly paying back what they owe.

He said the second measure announced by the Bank of Zambia which is to scale up open-market operations in order to increase short-term liquidity to commercial banks lacks specificity and is vague as it does not outline what those open market operations are.

Mr Tembo said it is therefore meaningless and unlikely to have any positive impact on Zambia’s ailing economy.

On the third measure announced by BOZ is that it will revise rules related to inter-bank foreign exchange transactions, Mr Tembo said just like others, this pronouncement lacks specificity and is vague as it does not outline what those rules related to inter-bank forex transactions which will be revised, are.

Mr Tembo said the fourth and fifth pronouncements made by BOZ to relax rules related to loan classification and provisioning as well as extend the transitionally period for the application of International Financial Reporting Standard (IFRS) 9 which is an accounting standard that regulates the classification, measurement, impairment, presentation and disclosure of financial instruments such as loans have dire financial and economic consequences because Zambia’s financial reporting system will not be compliant with that of the rest of the world.

Mr Tembo said International Financial Reporting Standards are issued by the International Accounting Standards Board (IASB) and IFRS 9 in particular was issued on 24th July 2014 to replace IAS 39 and was optional during the transitionally period until 1st January 2018 when it became mandatory.

“It must further be noted that the Bank of Zambia has no authority whatsoever to defer or postpone the application of IFRS 9 as only the IASB is vested with such authority. It therefore follows that the pronouncement by BOZ to extend the transitionally period for the application of IFRS 9 to Zambian FSPs is utra vires, inconsequential and done without due research and advice on the matter. It must be further noted that other regulators have equally found IFRS 9 to be a thorn in the fresh for FSPs in view of the COVID-19 pandemic, but they have not called for its suspension because it is a worldwide accounting standard”, he added.

He said a case in point is the European Banking Authority which has issued an advisory that the application of IFRS 9 in view of the COVID-19 pandemic must be done by taking all factors into account including the economic stimulus packages that are being implemented by respective Governments.

Mr Tembo said the sixth pronouncement to allow financial institutions to use capital instruments that do not qualify as equity for purposes of computing capital adequacy levels amounts to window-dressing of the financial statements of these FSPs and is illegal as it conflicts with the requirements of section 251 of the Companies Act, 2017 and also amounts to fraudulent false accounting.

He added that measures 7 and 8 talk about reducing the cost of digital payment channels and are commendable, although most financial service providers are unlikely to immediately comply and there is need for the Central Bank to enforce timely compliance.

He has since urged the Bank of Zambia to revisit the majority of the pronouncements made in its communique and ensure that such measures are consistent and not in conflict of international and local laws and regulations.

Mr Tembo has acknowledged the efforts being made by BOZ to try and mitigate the economic impact of COVID-19, but such measures should be properly researched and well advised, otherwise the medicine may end up being more fatal than the disease.

[Read 1,131 times, 1 reads today]

16 COMMENTS

  1. Its intended to make people think BOZ is doing something. Meant to easily make clowns like clinic officers KZ feel their government is working yet they are clueless
    Even broke Zimbabwe can afford to feed its citizens and provide $600m to small businesses…. while some clueless clown sleeps in state house

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  2. More like his brain is disjointed, impractical, vague and merely intended to give a false perception. What a constipated frog he is.

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  3. Managing a crisis is not a straightforward science which can be taught as crises differ. Covid-19 found us already dwn. Political point scoring is inappropriate at this time.

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  4. Sean Tembo is a joker that’s trying to act relevant. @ Kaizer Zulu, please tell this man to sit down. We don’t need jokers during such serious times.

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  5. The point Sean has missed is that BoZ as a semi autonomous institution can devise ways of how to relate with the institutions it superintends. These measures are usually announced after consultations, and usually institutions make proposals of what they require BoZ to consider. The loans default is by the Ministry of Finance and not BoZ. BoZ doesn’t run the GRZ payroll! Indeed GRZ owes various sectors money, SMEs are the most affected but will they pursue BoZ for their money? The measures BoZ has taken are within its mandate. What has messed up the country big time is PF’s uncontrolled appetite for nkongole. I don’t even why they’re shouting ECL2021! How can we continue with such characters?

  6. Your article has raised a number of concerns that went through my mind when BOZ made the announcement. I wondered whether BOZ has now got powers to regulate the accounting profession. What happened to the Basel 3 capital computation requirements as stipulated by the BFSA of 2017? Covid 19 may force the world to re-look at all current financial regulations and make changes. Some FSPs
    will definitely leave the stage!

  7. Thanks Sean, very sound advice but you know what type of ears the advice is falling on. It was the same advice given against reckless borrowing and we now reach a stage where we even fail to pay workers and respond to emergencies. Failed leadership clean

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  8. Sean can do a better job at Finance, just like Sinkamba can do at Commerce. These two always bring out issues that even those that are paid a salary every month by government are failing to bring up.

  9. Kaizar Zulu © THIS ARTICLE IS SURELY BEYOND YOUR COMPREHENSION….GIVE US A TECHNICAL RESPONSE …NOT JUST YAP YAP

  10. I had the same reservation when I read the measures BoZ is taking but Sean has articulated the issues far more clearly than I understood them. If only the powers that be could pay attention to the message and not the messenger maybe only maybe then could we hope to see them revisit their decisions?

  11. Much as I agree with the fact that the measures were vague,FSPs were informed that further guidance will be communicated to them in due course so I feel his arguments could have been communicated in a less confrontational manner.Secondly,I would like to disagree with him as regards the measures relating to provisioning.The communique from BoZ did state that the the new provisioning requirements was for prudential/regulatory purposes and these are different from the IFRS 9 that he is referring to.FSPs will still be required to report on their performance per IFRS 9 when reporting their year end results and ofcourse that will definitely show the full extent of the impact of the effect of COVID-19.The measure by BoZ is obviously to take into account this impact so as not adversely affect FSP…

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