ZAMBIA Institute of Chartered Accountants (ZICA) has urged companies with foreign currency-denominated loans to renegotiate for conversion of the loans into Kwacha to help stabilise the local currency.
The local unit has depreciated by over 50 percent from January’s trading level to K10.
Commenting on the state of the economy, ZICA is worried over the rate of Kwacha depreciation against major currencies.
ZICA suggests the formulation of measures that will mitigate future negative impact as a result of adverse effects of the global economic melt-down.
It says short-term measures that Government should implement to address the uncertainties in the market include giving assurance and practical steps on what is being done to arrest the situation.
“We also encourage companies with foreign currency denominated loan obligations but with Kwacha based revenue to renegotiate for conversion of the foreign-denominated loans into Kwacha. doing so will reduce the demand for foreign currency,” it stated.
ZICA also urged Government to harness and formalise the informal cross-border trading currently prevailing between some of the neighbouring countries.
“The foreign exchange earned through such borders will help in reducing pressure on the Kwacha,” it stated.
ZICA further advised Government to ensure that a sinking fund for each loan contracted is reflected in the national budget for the purpose of transparency.
It stated that contraction of debts to develop infrastructure for the expansion of the economy is a positive development but cautions that Government should strengthen laws regarding debt contraction and management.
“…We are concerned that money from some of the loans that have been contracted may not have been invested in productive projects that can contribute to economic growth and some may have been thinly invested across [a] spectrum of projects thereby yielding little tangible benefits.
“While we appreciate the measures taken by Government in creating a sinking fund for debt servicing, it calls for serious accountability and focus in ensuring that the sinking fund is operational,” it notes.