Zambia moves from dollar habit to Kwacha discipline

By Kelvin Chisanga

The Bank of Zambia’s issuance of the Currency Directives, 2025, effective 26 December 2025, reinforces the legal requirement that domestic transactions be settled in Zambian Kwacha, in line with *Section 18* of the Bank of Zambia Act.

The policy is intended to strengthen the role of the Kwacha and improve the effectiveness of monetary policy.

The Directives are expected to strengthen the Kwacha by reducing domestic demand for foreign currency and curbing informal dollarisation.

This will enhance the effectiveness of monetary policy, improve price transparency through Kwacha-based pricing, and support stability in the foreign exchange market.

Over time, increased use of the local currency is also likely to deepen financial markets and reinforce monetary sovereignty.

In the short term, businesses may face adjustment costs as contracts, pricing systems, and billing arrangements are revised.

Firms with foreign currency exposure could experience increased exchange rate risk, while some investors may initially perceive the policy as restrictive if not clearly communicated.

Enforcement challenges and the risk of informal dollar pricing practices also remain key concerns, particularly during the transition period.

Overall, the Currency Directives, 2025 are a structural policy measure with positive medium- to long-term implications for macroeconomic stability and confidence in the Kwacha.

However, successful outcomes will depend on balanced enforcement, clear communication, and complementary reforms to support businesses during the adjustment phase.