Limiting Local Dollar-Use, Needs Strategic Policy Thinking
De-dollarisation in Zambia seeks to restore the primacy of the kwacha in domestic transactions, reduce exchange-rate pass-through into prices and improve the transmission effectiveness of the monetary policy.
If done pretty well, it can then lower inflationary pressures, align bank lending with borrowers’ incomes, and further strengthen financial stability.
However, risks include liquidity challenges for import-dependent businesses, potential distortions if enforced too rigidly, and the re-emergence of parallel markets, as seen earlier before under the then Statutory Instrument 33 (2012–2014).
The policy will only succeed if confidence in the kwacha improves, which depends on addressing key fundamental issues such as copper exports, power supply, reserves and inflation stability.
Key enablers include phased implementation, reliable access to FX through deepened interbank markets, hedging tools for businesses that depend on forex trading system and build consistent communication with key trade authorities.
Above all, de-dollarisation must be a gradual process and a transparent model supported by stronger economic fundamentals.
However, it is also important to note that de-dollarisation is not a quick fix but, if carefully managed, it can strengthen Zambia’s monetary sovereignty, protect consumers from exchange-rate-driven inflation, and build a more resilient financial system.
