Caleb M Fundanga: Repatriation of bank notes between Zambia and
Mozambique
Speech by Dr Caleb M Fundanga, Governor of the Bank of Zambia, at the signing ceremony
of the Agreement on Repatriation of Bank Notes between the Bank of Mozambique and the
Bank of Zambia, Lusaka, 4 February 2009.
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•
Your Excellency, the High Commissioner;
•
Governor Ernesto Gouveia Gove, Governor of the Bank of Mozambique;
• Members of the Mozambican delegation;
•
Bank of Zambia staff present;
•
Distinguished Invited Guests;
•
Ladies and gentlemen:
May I begin by extending a warm welcome to Governor Gove and members of the
Mozambique delegation to Zambia in general and to this signing ceremony of the Agreement
on the Repatriation of Bank Notes between the Bank of Mozambique and the Bank of
Zambia, in particular.
Governor, the existence of an extensive border between Mozambique and Zambia has
resulted in significant cross-border trade as evidenced by the movement of people, goods
and currencies across the border thereby strengthening our shared identity and background
as Africans. I must however, hasten to mention that, the cross border trade has hitherto been
hindered by the need for traders from both sides of the border to convert funds into United
States Dollars and then convert funds back into the other currency when purchasing goods
or services. By so doing, cross-border traders incur foreign exchange losses as well as other
conversion costs in the process.
Further, the issue of a parallel currency market existing among the cross border traders
between the two countries point to the need to strengthen bilateral trade between our
countries and put in place payment systems that should promote this trade based on the
exchange of the two local currencies. In this regard, this agreement is critical to facilitate
better trade between our sister countries.
Your Excellency, there are, however, challenges associated with the currency of one
country circulating in another country and these need careful scrutiny and handling. These
include vices such as counterfeiting and facilitating illegal trade as well as enhancing cross
border money laundering activities. Moreover, to us as monetary authorities, cross-border
local currency circulation creates the potential of complicating the conduct of monetary
policy, especially if a significant amount of the country's domestic currency is being used
outside the jurisdiction. For us who target monetary aggregates, this may lead to
implementation of inappropriate monetary policy decisions which may adversely affect the
real economy.
Currency repatriation is critical as it will allow us adjust the currency in circulation, a key
component of reserve money, which is the intermediate target in our monetary policy
operations. We are therefore looking forward to the implementation of the agreement we are
signing today to facilitate currency repatriation between our two Central Banks.
I am therefore, very pleased that the long months of discussions between the Banco de
Mozambique and the Bank of Zambia have resulted in the mutual agreement to repatriate
both the Meticais and Kwacha. This achievement should be saluted as citizens of both
countries will now be able to pay for goods originating from the other country with the
currency of that country, hence eliminating the need for currency conversions by citizens.
Distinguished Ladies and Gentlemen, this agreement is also a step towards further
strengthening trade and financial cooperation between the two countries. It provides the legal
basis for commercial banks, bureaux de change and other financial institutions to freely
accept each country's currency and repatriate it through the banking system with full
accountability. The agreement will not only enhance trade cooperation but will also increase
cooperation between our two central banks. Furthermore, the agreement provides a platform
for sharing information on the bank notes in use by the two central banks. This information
exchange initiative should not only end at central banks, but be extended to all economic
entities that will use and benefit from this development, especially our hard working farmers
who should be paid genuine currencies when they sell their produce.
Once again, Governor, let me thank you most sincerely for initiating this agreement. Indeed,
the signing of this agreement is a testament of the cordial relationship that has existed
between Mozambique and Zambia since the days of the liberation struggle. I must add here
that, for us, it marks a key milestone towards enhancing regional integration and
macroeconomic convergence. As you are aware, Governor, this is our main goal as member
countries of the Southern Africa Development Community.
I thank you.