br-01-2.jpgZambia’s reserves were seriously depleted amounting to less than 1% of its foreign debt in 1998 but have since grown with an accumulation equivalent to about 28% of the same in 2006.

Overall, Sub-Saharan Africa as a whole increased it’s shock absorbers (international reserves) from $21 billion in 1996 to $108 billion last year representing a fivefold growth (see chart) but Zambia’s portion beat this fivefold variable by almost 28 times. This year international reserves for Sub-Saharan Africa are expected to near $131 billion.

Globally, reserves have tripled on average during the same period and, according to the IMF, even the developing world has failed to match Africa’s stockpiling. What we are seeing here is that the African continent is learning the secret of saving for a rainy day.

This is a powerful tool and the Japanese were the first to use it such that by increasing their own reserves they were able to boost their own economy.  By 2001, the Japanese held six of the world’s largest banks and the rest is history.

Increased reserves not only increase a countries purchasing power but they also allow the holding nation to increase its credit rating in the world.

Most factors that have helped the Zambian Enterprise are debt-cancellation related. But the biggest winner is the work the Zambia Revenue Authority (ZRA) has been doing in the last six years.

Zambia’s tax regime is highly competitive and some of the expiring tax holidays have also helped increase the tax base. Furthermore, the Bank of Zambia has been doing a fabulous job monitoring inflation, and reducing the money supply.

Such a combination of factors is attractive to the creation of dynamic economy and it is for the same reason that the world’s largest clearing house is looking at including the Zambian currency as an international medium of exchange once certain of their conditions are met … thanks a trillion.

Brainwave R Mumba, Sr.

CEO & President – Zambian Chronicle

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