The International Monetary Fund (IMF) has raised concerns that Zambia’s proposed ban on charging foreign currency in local transactions could undermine its own objectives.
The new regulation, which includes a penalty of up to 10 years in jail for violations, aims to curb the increasing dollarization of the economy. However, the IMF suggests that these measures might be counterproductive.
In June, Zambia’s central bank announced the plan to limit dollarization, emphasizing that it hampers the central bank’s ability to control inflation effectively. As Africa’s second-largest copper producer, Zambia is striving to stabilize its economy amidst ongoing debt negotiations.
Despite the government’s intentions, local businesses have criticized the proposed regulations, labeling them as “punitive.” They warn that the restrictions could exacerbate price growth instead of curbing it.
The backdrop of these developments includes Zambia’s ongoing debt negotiations with international creditors, including the IMF. The country’s economic stability is closely tied to these discussions, making the de-dollarization strategy a critical point of contention.
As Zambia continues to navigate its economic challenges, the IMF’s perspective adds a layer of complexity to the debate over how best to manage inflation and stabilize the national currency.
Source: Bloomberg
