Wednesday, January 2, 2013

New Year, New Money!

I squealed a little bit inside the ATM.  Or perhaps it was more like screaming.

"Hey, you, what's your problem?" I heard.

"Is that guy talking to me?" I asked my friend Derek, who was waiting beside his bike outside the ATM cubicle's reflective blue glass. I looked out and saw a man in a taxi looking back at me.

"What's your problem?" he repeated.

"New money!" I exclaimed, and we both laughed.

January 1st was the first day the Zambian government unrolled the new rebased kwacha.  There have been posters up for months depicting the forthcoming bills and coins, but this was the first day my bank account reflected the new notation and spit out crisp new currency.

Essentially, the government has cut three zeros off the end of our currency.  The exchange rate since I've been here has been roughly 5,000 kwacha for $1 USD.  In common parlance we say "5 pin," and I'm told it's because when rapid inflation happened years ago, people would literally pin together a stack of bills to equate to 1,000, so any multiple of 1,000 translated into that number of pins of bills.  Now we will say simply, "5 kwacha."  To take the place of amounts smaller than K1,000--particularly the highly useful K500 note, which has bought me many a bun, scone, and fritter--the government will soon be unveiling coins, with the name of Ngwee, which seem to me to be similar to the coins that were used not long after Zambian independence but were either institutionally phased out or just sort of faded away as their diminishing value made them useless.

The motto on the posters has been "New money, same value," but rebasing is a tricky business.  I don't know the economics of it, but I'm interested to see how it plays out.  Yesterday, running errands around town and asking vendors their prices, many people laughed as they would say, "4 thousand...4 KWACHA!"  The value of the currency has not changed, just the number of zeros.  But money is a psychology, and it does  involve a mental shift.  Currently both currencies can be used, which is a bit tricky.  The picture below shows a brand-new 50 kwacha and 100 kwacha note next to an old 50,000 kwacha and 100 kwacha note.  The two "50s" are equal in value--I can use either today to buy the same item.  But the old 100 kwacha note is just as useless as it's been for a while (procuring me perhaps a small candy, similar to a penny-candy idea) while the new 100 kwacha has the value of two new 50 kwachas.

Simple math, right?  But when you've been accustomed for years to the idea that 100 kwacha has almost no value, it's a change to think that it has a *lot* of value.  So much that some worry it will in effect become useless, as well, because in village economies that run primarily on (former denominations) K500, K1000, and K5000 transactions, for things like eggs, soap, cooking oil, and soda, it has always been very hard to use a K50,000 note.  No one has change for it.  As PCVs we are always very intentional to use a variety of K50,000 bills when in town, at big shops, on transport, etc. so that when we reach our village we will have small bills we can use for small transactions.  Now, however, there's not only a K50 bill (same as the previous K50,000) but a K100 bill.  The ATM gleefully deposits the currency in my hand, but I'm a little will I ever use this, other than on a cross-country bus ticket or in the provincial capital supermarket?

The two currencies will both be in circulation until June, I believe, so any effects will take a while to see.  Nonetheless, it's a fairly exciting thing to witness!

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