Monday 15 July 2019

A curtailment of the Central Bank's powers?

Like everyone else, I have been reading through the draft of Zambia's 2019 Constitution Amendment Bill.  The Bill, which is yet to be tabled in the National Assembly, proposes a host of amendments to the current constitution. Many of the proposed amendments have been condemned by different sections of Zambian society including, and surprisingly so, the ruling Patriotic Front. One of the things that's caught my attention in the Bill, and that hasn't been touched on yet, is what appears to be a curtailment of the Bank of Zambia's powers.

The memorandum that accompanies the Draft Amendment Bill from the Attorney General lists a series of objectives of the Bill. Objective (n) reads: " revise the functions of the Bank of Zambia". Article 71 of the Bill spells out the exact revision that is sought as follows:

71. Article 213 of the Constitution is amended by the deletion of clause (2) and the substitution therefor [sic] of the following: (2) The function of the Bank of Zambia is to formulate and implement monetary policy. 

However, clause (2) of Article 213 in the current Constitution (the clause to be replaced) reads [for completeness I am also reproducing clause (1)]:

213. (1) There is established the Bank of Zambia which shall be the central bank of the Republic. (2) The functions of the Bank of Zambia are to— (a) issue the currency of the Republic; (b) determine monetary policy; and (c) regulate banking and financial services, banks, financial and non-banking institutions, as prescribed.

So it seems that the Draft Amendment Bill seeks to strip away from the Central Bank the functions of issuing currency and the regulation of the financial sector. These two functions are pretty core to what central banks do across the world. And I can't see how another entity would logically takeover these functions, particularly the one to do with issuing currency. And the Draft Amendment Bill is silent on where functions (a) and (c) will now sit.

This is a strange amendment and one hopes that Members of Parliament will probe for details and justifications once the Bill is tabled in the National Assembly.