Zambia Central Bank Cautions Businesses Against Pricing Products In Foreign Currencies

Zambia Central Bank Cautions Businesses Against Pricing Products In Foreign Currencies

Zambia’s central bank has warned businesses in the country to stop pricing their goods in dollars and other foreign currencies claiming that the local currency was depreciating too fast, the Lusaka Times reported.

Bank of Zambia said in a statement that it was illegal to price goods and services in foreign currencies if your input costs are not in Zambian kwacha. The bank said that the Kwacha was the legal tender in Zambia and that all domestic transactions are required to be priced and settled in Kwacha.

“The pricing in foreign currencies reduces the price incentive of a depreciation in encouraging businesses to engage in the export or production of goods that are currently imported,” a statement from the Bank of Zambia communication department said.

“In addition, the pricing in foreign currency implies that businesses are adjusting their prices to reflect the extent of the movements in the exchange rate and yet most of their operating costs are not in foreign currency.”

Zambia’s kwacha, the local currency in Africa’s second-largest copper producer, has tumbled 32 percent against a globally stronger dollar so far this year as copper prices fell to a six-year low in line with other commodities in the international market.

Bank of Zambia said “the Kwacha exchange rate has had some relative stability following measures taken by the Bank of Zambia and the Government” over the past week, but there were concerns that pricing of locally traded products in foreign currencies could put it on the back foot again.

“If left unchecked, the practice has the potential to increase the demand for foreign exchange and intensify pressure on the exchange rate,” the bank said.