Zambian banks and the country’s central bank agreed to form a committee to study the foreign-currency market after the government said banks were manipulating the kwacha.
Bank of Zambia leaders met with the Bankers Association of Zambia in Lusaka, the capital, today to discuss “areas of concern” about the currency, Deputy Governor Bwalya Ng’andu said by mobile phone. “We thought it was necessary that the banks understood we had concerns and we need to address them,” he said.
The committee will comprise members of the bankers’ group and central bank staff, Ng’andu said. It will begin work tomorrow, compiling terms of reference and deciding on the duration of the study, he said.
The currency of Africa’s biggest copper producer has slid 3.4 percent against the dollar this year, and was trading 0.4 percent weaker at 5.37 by 4:35 p.m. in Lusaka. Zambian banks are “obviously led into temptation” to profit from manipulating exchange rates, Finance Minister Alexander Chikwanda said in a statement to lawmakers Feb. 26.
The rates are determined by inter-bank arrangements and since there is a “cartel” of only a few banks in the country, “there is quite clearly a pronounced element of manipulation,” he said.
“The Bankers Association of Zambia does not accept that there is currency manipulation among its members,” Chief Executive Officer David Chewe said in an e-mailed statement yesterday. Members include units of Barclays Plc and Standard Chartered Plc.
Chikwanda also presented on Feb. 26 a draft amendment to the Bank of Zambia Act, which allows the government to regulate and monitor foreign-exchange flows in and out of the country. It also allows the central bank to limit lenders’ transaction fees.
“There is a fear or perception in the business community that these amendments effectively introduce exchange controls,” Chewe said. “Any adverse policy measures that could impinge upon the free market by stifling product innovation and create instability in the banking sector should be avoided.”
Chikwanda didn’t name any banks in his statement.
President Michael Sata has “legitimate concerns” over the weaker kwacha, which can lead to inflation in the country, Bank of Zambia governor Michael Gondwe said in a Feb. 5 interview. The currency should trade at 5 to 5.10 per dollar, Chikwanda said the same day.