Bank of Zambia
| Headquarters | Lusaka , Zambia |
| founding | 7th August 1964 |
| country | Zambia |
| currency | |
| ISO 4217 | ZMK |
| Currency reserves | US $ 500 million |
| Website | |
| predecessor |
Bank of Rhodesia and Nyassaland |
| List of central banks | |
The Bank of Zambia (BoZ) is the central bank of Zambia . Its central task is to formulate and implement monetary and banking supervisory policy goals and to ensure the stability of Zambia's monetary value and financial system. The seat of the BoZ is in Lusaka .
history
The history of the Bank of Zambia goes back to the Southern Rhodesia Currency Board , which was founded in Salisbury in 1938 . Due to an agreement, its area of law extended to Northern Rhodesia, today's Zambia, and Nyassaland, today's Malawi. In 1954 it was named Currency Board of Rhodesia and Nyassaland and became the property of the government of Rhodesia and Nyassaland.
Currency boards are not central banks. They don't offer services like banks do. Their only function is to provide the money, while central banks also perform control functions for the money and financial markets. In the case of the Central African Currency Board and its predecessors, this meant 100 percent coverage by reserves in London in British pounds sterling. As a result, the money supply grew or melted with the reserves, not with the economic strength.
Soon the discussion about establishing one's own central bank grew louder. It became clear that monetary policy played an important role in economic growth, primarily through the provision of credit. This was in stark contrast to the strict rules of the currency board, which could not even react to cyclical fluctuations. It was also criticized that the money supply in Rhodesia is 100 percent dependent on the reserves in London, which would tie up an enormous amount of capital that would be needed for domestic investments.
Even so, the currency board could hold up for a good while, because it was a tiny organization and easy to manage. It also disciplined the public purse because the government could not borrow money from the board. That kept inflation rates close to zero. That experience, rather the lack of a bad one, may have played a role in the 1970s and 80s, when the Zambian government borrowed large amounts of money from the Bank of Zambia to stimulate the economy, but created inflation that sustained citizens the purchasing power withdrew.
The foundation
The Bank of Rhodesia and Nyassland , a central bank, was founded in March 1956. Right from the start, it had the usual powers of monetary policy, currency reserves, a bank for the government and banks. The bank was able to grant loans to local authorities and the government up to a certain limit set by the expected tax revenue of a year.
The Bank of Zambia was created on August 7, 1964 by taking over the Bank of Northern Rhodesia . However, the law on this was not passed until June 1965. The Bank of Northern Rhodesia, in turn, was created in September 1961 from the Lusaka branch of the Bank of Rhodesia and Nyassland . On December 31, 1963 the Federation of Rhodesia and Nyassaland broke up.
The BoZ began with 100 employees in two departments, specifically the main cashier and the personnel department. The chief cashier had previously been responsible for enforcing monetary policy decisions, currency affairs, banking policy, government securities, exchange control and management.
Over time, the number of departments grew. The first to be added in 1967 was a research department. The operational department was created in 1976 and then more and more especially in the 1980s. Human resources and administration 1977, foreign exchange control, import and export control, investments and assets all 1981, followed by banking and currency affairs, medium-sized industry, inspection 1982, as well as national debt, transportation, government securities 1984.
The number of departments of the BoZ grew as the functions assigned to it by the government increased. Since this exercised a dictatorship, especially with foreign exchange control and import and export controls, it had an excessive regulatory effect on the economy. In addition, there was an increasing need on the part of the banks for assistance in these areas. The BoZ itself made fewer and fewer differences between main and secondary areas, which caused its costs to skyrocket. It not only offered its employees accommodation, which was quite common, but also furnished it in many cases. The management of such a property requires considerable personnel. In addition, politicians made more and more unattainable wishes for the BoZ. In the foreword to Ter 'Years of Banking in Zawhia , a BoZ publication, then President Kenneth Kaunda wrote :
- "The greatest weight of our efforts lies in the rapid development of the rural areas, in which most of our citizens live. In this sense, I trust that the Bank of Zambia will not confine itself orthodoxly to its central bank task of maintaining monetary stability I would rather see a banking system that takes on the challenges as a whole and provides tools that contribute to new growth in rural areas in particular and the other sectors of the country in general ... "
At that time it was a common position in developing countries. Something comparable can be read at this time with a view to the Reserve Bank of India . For the BoZ this meant a further department, this time for the promotion of small and medium-sized businesses. Accordingly, the number of employees rose from 400 in 1975 to 1,226 twelve years later and further to 1,400 in 1994, which led to new buildings. A new BoZ building was inaugurated in Lusaka in 1975 and a regional branch was set up in Ndola in 1979. Both complexes had to be constantly expanded.
During this time, the BoZ reacted more and more frequently to external employment requests and not to the actual needs of its function as a central bank, as an expert wrote in 1989. A constant change at the top of the BoZ had also contributed to this. Since 1964 there have been ten governors in 28 years, which results in a length of stay of 2.8 years, which could not in any way ensure continuity, strategic planning or future tasks.
The new tasks
The Bank of Zambia Act of 1965 and its subsequent amendments mandate this organization with the usual responsibilities of a central bank, such as the bank of the government, of managing physical money and foreign exchange reserves, controlling and ensuring the liquidity of the banks, and monetary policy in objectives and to determine implementation. Although price stability is stipulated in the law as one of the goals of BoZ, in practice it does not enjoy any special significance. This is by no means specifically Zambian. Many central banks in Africa have only gradually understood the relationship between inflation and employment. In Zambia, this led BoZ to acquire shares in the Development Bank of Zambia and the Zambia National Commercial Bank in order to be able to implement economic and thus employment policy goals more concretely. This enables them, for example, to develop and operate a huge estate. Whether that is one of the tasks of a central bank is another question.
In the meantime, central banks have generally accepted that maintaining price stability is the best way of contributing to the macroeconomic balance. Likewise, the salutary disillusionment is slowly taking hold that a central bank can promote general prosperity by providing cheap money and accepting higher inflation in return. The BoZ is also increasingly geared towards these goals in order to secure future economic growth and employment, i.e. to liberalize the economy and assign a greater role to market forces.
Since 1991 the BoZ has changed its policy accordingly. This created numerous frictions, not least because other authorities had not learned their lessons. Privatization and liberalization are not possible without coordinated concepts. Not everything can and must be privatized and not everything can and must be liberalized. But this lesson has yet to be learned by everyone involved in Zambia, including BoZ. Price stability and a resilient financial system are, however, important goals that can be achieved.
Since 1998 the BoZ has modernized the country's payment system in accordance with the guidelines of the Basel Committee and switched to electronic payment systems, in particular an electronic clearing house, which is intended to accelerate bookings among the banks. As this involves a considerable number of risks, a framework law for electronic payment systems is currently being drawn up. However, the time of the collapse of this system seems to be over.