BoZ in money printing accusations

BoZ in money printing accusations


The UPND has noted the recent remarks by the Bank of Zambia (BoZ) Governor with regards to allegations of money printing at the central bank in light of the colossal sums of money being displayed by members of the ruling Patriotic Front.

The facts, which the Governor may or may not be aware of are as follows:

1. Currency in Circulation (total cash issued by the BoZ and includes vault cash held in deposit taking institutions) has increased by 52% (K7.7bn to K11.8bn) in the 12 months to February 2021. This is by far the fastest increase of physical cash in circulation in the past 10 years.

2. BoZ lending to Government (through purchase of Government Debt by creation / printing of money) has increased from K143m in January 2015 when President Edgar Lungu took office to the current figure of K24bn as at February 2021, an increase of 15,700%. This is completely out of tandem with the mandate of the BoZ and has never happened to this extent before in Zambia.

3. The BoZ Act of 1996 (Part 7, Clause 49 and 50) does not allow for BoZ to lend to the Government except in “Special Circumstances”, and where such “Special Circumstances” as outlined by the Finance Minister require such lending, it shall not exceed 15% of the ordinary revenue of the government in the previous year. Where the 15% limit is exceeded, the Governor is required by the Act to advise the Finance Minister accordingly and not allow any further increase.

4. Government’s 2019 revenue amounted to K60bn, allowing a maximum lending limit of K9bn. As at December 2020, BoZ had lent K22.6bn, K13.6bn over the legal limit.

5. Creation / printing of money does not have to be the actual printing of physical cash, but can be done electronically through purchase of government debt.

Based on the above facts, can the Governor clarify the following:

1. Why has the growth of currency in circulation (physical cash) grown at a record rate over the past year if BoZ has not been printing physical money, considering there has been an emphasis on the use of e-payment channels due to the Covid-19 pandemic?

2. What “Special Circumstances” as defined in the BoZ Act have required the BoZ to lend to the Government, and why has the public not been made aware of these “Special Circumstances”?

3. What has driven the astronomical growth in BoZ lending to Government (and consequent money creation)?

4. The BoZ has far exceeded its legal limit of lending to the Government. Did the BoZ comply with the requirements of the Act and inform the Finance Minister of this breach?

5. Why has the BoZ continued to lend to the Government against the provisions of the law, risking economic stability, higher inflation and the credibility of the Zambian Kwacha as a stable Currency?

6. If the BoZ is not creating / printing money (electronically), how are they lending to the Government?

The UPND is deeply concerned around the activities of the BoZ in collaboration with the Ministry of Finance and the potential impacts of the money creation activities as outlined by the Bank’s own statistics.

Inflation is already rampant and money in circulation has visibly increased, particularly in the hands of Government and PF party officials, consistent with the statistics from the Boz. The regulations within the BoZ Act of 1996 were specifically created to ensure events as unfolding today of uncontrolled money creation / printing were never allowed to happen again in Zambia.

Whilst we await clarification from the Governor on the above, we continue to encourage the officials from the highly respected BoZ to maintain their independence and ensure compliance with the BoZ Act.

Anthony Bwalya
UPND Presidential Spokesperson
12 March 2021.

Share this post