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In a bold move aligning with the de-dollarization efforts championed by the BRICS economic alliance, Zambia has announced stringent measures to phase out the use of the US Dollar within its borders.
BRICS is an acronym that stands for Brazil, Russia, India, China, and South Africa. It represents a group of five major emerging economies across different continents—South America, Europe, Asia, and Africa.
The formation of BRICS was initially an economic concept coined by economist Jim O’Neill in 2001 to describe emerging markets that were expected to play a significant role in global economic growth in the 21st century.
However, Some BRICS countries have signed bilateral currency swap agreements. For example, China and Russia have a significant currency swap agreement that facilitates trade and investment between the two countries using their own currencies (Chinese yuan and Russian ruble) instead of the US dollar.
The Southern African nation is set to enforce new legislation that could see individuals using foreign currencies for local transactions facing severe penalties, including up to ten years in prison or hefty fines.
The initiative, detailed in a draft document released by the Bank of Zambia on Saturday, underscores Zambia’s commitment to promoting its local currencies, the Zambian kwacha (ZMW), and ngwee, over the US Dollar.
This move aims to bolster economic sovereignty and align with the broader regional sentiment across Africa towards reducing dependence on external currencies.
Former Zambian President Thabo Mbeki has voiced support for the initiative, highlighting growing global skepticism towards the US Dollar’s role as a dominant global trading currency.
Mbeki emphasized that many African and Latin American nations, alongside economic powerhouses like China and India, have been reevaluating their reliance on the US Dollar in international trade agreements.
Francis Chipimo, Deputy Governor for Operations at the Bank of Zambia, emphasized the necessity of using local currency during public engagements, citing its positive impact on monetary and exchange rate policy management.
Chipimo argued that reducing dollarization would enhance Zambia’s economic stability and independence.
Zambia’s move reflects a broader trend among African nations to diminish reliance on the US Dollar, influenced in part by closer economic ties with BRICS member states, particularly China.
Chinese financial institutions, such as the Bank of China, have expanded their presence in Zambia and neighboring countries, symbolizing deeper economic integration and investment across the region.
While Zambia has not yet formally applied to join the BRICS bloc, its proactive stance on currency reform is expected to draw attention at the upcoming BRICS summit in October.
The nation remains open to foreign currency exchange for visitors, but strict enforcement measures underline its commitment to implementing the new legislation effectively.
