Zambia Lifts Foreign Exchange Limits to Counter Parallel Market

Zambia’s central bank increased the amount of foreign exchange that people can buy or sell daily in an effort to draw business away from the parallel market, Governor Christopher Mvunga said.

The nation’s kwacha currency has depreciated against the dollar every day for almost four months. Even as prices for copper, which the country depends on for about three-quarters of export earnings, reached historical highs, the Bank of Zambia’s foreign exchange reserves have dwindled to near record lows, and there are dollar shortages. That’s caused some people to try source foreign exchange through informal channels.

To combat this, the central bank increased the limit that customers can buy or sell from a bureau de change to $5,000 from $1,000, and the maximum that commercial bank account holders can access daily to $10,000 from the previous $5,000. The old limits were set 20 years ago and led to a distortion in the market, Mvunga said in comments broadcast Thursday on Lusaka-based Hot FM radio.

“This allows for a smooth operation, an efficient operation of the bureaus,” he said. “It also disintermediates the need for people to go onto parallel black markets to exchange money, because the limits have been raised.”

Zambia, which last year became Africa’s first pandemic-era sovereign defaulter, has struggled to stem the slide in its currency and boost the central bank’s foreign exchange reserves. The government has tried various actions, including forcing mining companies to pay all statutory obligations in dollars, with little impact.