by Richard Giedroyc
April 9, 2013 – Zambia is anxiously introducing a new series of what it calls “rebased” coins and bank notes in an effort to help quell inflation. Coin shortages and a lack of understanding by the public appear to be problems being faced along the way.
According to the March 8 Lusaka Times newspaper, “The Bank of Zambia (BOZ) says it has withdrawn about 3.178 trillion kwacha (3.178 billion rebased kwacha) as at the end of 28th February 2013 and issued about three billion rebased kwacha (178 trillion kwacha) since the new currency was introduced into circulation at the beginning of the year. BOZ Head of Public Relations Kanguya Mayondi says this represents 82.71 percent withdraw of cash in circulation at the close of the year 2012 which stood at 3.841 trillion kwacha (3.841 billion rebased kwacha).”
Mayondi said the old and new currencies are currently circulating simultaneously. Plans call for the old kwacha bank notes to be demonetized on June 30, with the notes still able to be redeemed by the central bank through the end of 2013. According to Mayondi, the central bank is on schedule to meet this deadline.
Unfortunately while the central bank may be ready for the full conversion, it appears the general public is not. The biggest problem appears to be a lack of knowledge of what is going on.
According to the Lusaka Times, “And some members of the public in Mumbwa have expressed ignorance that the exchange of the old kwacha notes will continue up to December 31, 2013. This came to light yesterday [March 7] when Bank of Zambia officials visited the district to assess the impact on the use of the rebased [bank] notes and coins.”
The newspaper article continues, “Some said they would destroy the notes after 30th June as they will no longer be in use.”
Perhaps the biggest problem, according to Mumbwa Market Chairperson Humphrey Shamasale, is that the average citizen has what the newspaper described as “no adequate knowledge on the conversion of smaller notes to coins.”
The newspaper went on to report an unnamed “businessman of Asian origin” complaining there are insufficient supplies of coins in circulation, this lack of supply discouraging the public from making the conversion from older kwacha bank notes to new ngwee denomination coins.
The currency rebasing lobs three zeros off all existing bank notes. Coins are being introduced in denominations of 5, 10, and 50 ngwee and 1 kwacha. It takes 100 ngwee to equal one kwacha. The ngwee coins are equal respectively to the older 50, 100, and 500 kwacha bank notes they are replacing.
It is questionable if by introducing a new currency system this will resolve the inflation problems plaguing Zambia, but without the public being properly educated there is little question regarding if the new system will work or not.
Zambia has made some effort to educate the public regarding the rebased kwacha coins and bank notes. The local police in Mumbwa have reported arresting an individual who took down a poster on which the new bank notes were illustrated. This individual cut out pictures of the front and back of the notes, glued them together, laminated his new currency, then attempted to spend it—unsuccessfully!
This is Zambia’s second attempt to re-introduce coins into circulation since inflation became a serious problem during 1980s. All ngwee denominated coins had ceased production by 1988, while the 1-kwacha coin of the following year circulated for only a short period of time as inflation quickly diminished its purchasing power. A 1992 effort to re-introduce coins into circulation failed as inflation continued to ravage Zambia’s economy.
All older Zambia coins are still legal tender, however their metal content exceeds their face values. For this reason although older coins are occasionally sold to tourists the coins don’t circulate.