Renowned Economist Professor Oliver Saasa has called on government to consider putting in place mitigation measures aimed at strengthening the local currency, the Kwacha, which has been sliding against major foreign currencies.
Prof. Saasa said government, through the Bank of Zambia, should inject resources into the country’s economy from its reserves in order to stabilize the local currency.
He told ZANIS in an interview in Lusaka today that the loss of value which the Kwacha has recorded over the past few months has a negative effect on production and expansion of many sectors of the country’s economy.
He said this development threatens all the economic fundamentals of the currently hence the need to urgently institute measures against the sliding of the local currency.
Prof. Saasa attributed the depreciation of the Kwacha to the scarcity of the foreign exchange currencies such as United States dollar on the market.
He said the nervousness that characterized the investment market before and after the September 20, 2011 tripartite elections would also be a contributing factor.
The Zambian Kwacha has continued losing value against major currencies. The Kwacha has now gone beyond K5,200 against one US dollar.
According to the latest statistics released by the Bank of Zambia yesterday, February 14, one US dollar was now fetching between K5,245 and K5,265 while a Euro is now was selling at between K6, 904 and K6,932.
The Central bank figures showed that one British Pound was between K8, 244 and K8, 277 while the South African Rand was selling between K676 and K683.
According to the Central bank, one US Dollar was costing between K5, 136.89 and K5, 156.89; one British Pound was trading between K7, 947.28 and k7, 979.77 while the South African Rand was getting between K644.81and K647.73 about three weeks ago. The Euro was trading between K6, 633.78 and K6, 661.15.
ZANIS
hahahahahaha romove zeros three 000
Hypothesis: The scarcity of Forex and depreciation of Kwacha is due to scrumble for purchase of foreign currency due to the looming change of currency in six month time?. Those who burried funds e.g Liato formular are now exploring and converting it into US $ or other forms hence the shrotage which has in turn caused a rush for forex and depreciation of the Kwacha. It has nothing to do with economics !!.
this is economics. why are u shooting yourself in the foot?
But ulichikopo,you have just explained economics mambala
Looks like you are smarter than you realise. You know one of the fundamentals of economics without even breaking sweat and you didin’t even realise it?. Had Adam Smith still been around to read your blog, he would have said ‘wow’.
That is the correct value of the Kwacha – between K 5 000 and K 5 500 to 1 UD $ – as the previous Government delibaretly made the Kwacha “strong”. What makes a currency strong? Production. There are no new productive ventures except from traditional sources, i.e., copper earning. For the Kwacha to gain, strenghten tourism and agriculture (and create subsidiary industries) which are also massive employers.
value addition,increase shareholdings in mines so that some forex are retained into the country and create forex for others to use.
Muchinga mokeys cant run the ecomy. They are busy stealing from the treasury. Fimitwe, shaa
Nonsense
#2 JJ – I think you have a point there. Liato was not the only one with burried money. There are bigger fishes out there. Its is also a well known phenomenon that asians do not keep money in the banks to avoid taxation. If all these people have to rush for forex, you don’t have to be an economist to deduce that Kwacha will lose its value. What Prof Saasa is advocating is to artficially prop the kwacha which is a dire suggestion
Just introduce USA dola; simples!
@JJ.Muzachiona; great point when you also add into the equation our Zambian Asian brothers and sisters who convert their money into gold jewellery and then bank the rest of the money at home..there is definitely going to be a high demand for forex!!Â
If the depreciation is due to money laundering, isn’t BOZ supposed to spot that? Dont they regulate forex trade in Zambia?
Besides, did ZMK begin to depreciate after GRZ announced the removal of 000s from the Kwacha or had the depreciation already began? Probably due to PF govt’s attitude to foreign investors aka grabbing Zamtel?
The nationalisation of Zanaco coupled with economic dificulties in Europe and the US which have had a knock on effect on Chinese demand for our stuff such as copper, is likely the main reasons for the decline in the Kwacha. Looking into the future the likelihood of a lower than expected maize harvest this season will put more pressure on the Kwacha. All this will be exacerbated given the expansionary fiscal stance that the new government has adopted in line with its manifesto. The inflation number in June will be interesting to look at. In the meantime GRZ would do well to firm up on its economic policy/ies and ensure that it speaks with one voice to engender the sort of confidence that these complex and uncertain times require.
Your analysis is spot on.
Where is Mushota Chimfwembe to pass a stupid comment and derail bloggers!??Â
why doesn’t zambia think of building and cleaning its infrastructure to attract tourism and investors this will help growth,decrease in  poverty and help reduce infectious diseasesÂ
I find it strange when people say it has nothing to do with Economy! Wake up that is the Economy….
Of course the inflation and depreciation of Kwacha will increase
sustained deterioration in the purchasing power of Kwacha, with money being ridiculously flashed around during this past tournament that, How do you give a gist of $59 000 will that gift mean they will pay tax from it?
I am elated to see it has devalued because then all the embezzlement from Zambian leaders might stop. I will keep deriding the joy of it all
Zambia is, and has always been mismanaged the power-mongers appointed and those filling most of those position are not capable of their positions. Tribalism ignorance,  will mean Zambia is a worse place than it was 10 years ago. You have sold your country to the Chinese and South Africans, How much more can one use you?
Thanks
How many rounds did your boy friend give you today. For the first time you have spoken sense.
Nonsense, you’re jealous cause the boys were given $59 000 each and you can’t stand that.
With baseless  and useless comments from Bob Sichinga that the previous govt printed money, and bogus announcements from Kambwili that nurse will get 100% increment, every person will divert their Kwacha into Rand, Pula, Dollar or Pound. It is time Ministers learnt to make announcements that are productive and make sense.
these mmd chaps printed money. and for sure, they are busy converting it into hard currency now that they know this pf govt. to be very very very slow to arrest them.
You havent seen nothing yet, donchi kubeba.Where is my uncle, Sata to promise you abit more of that utopia…..’aaaar, all of you will have money in yoir pockets in 10 days, hehehe’
As for me and yama,
I will start complaining when it reaches 10 pin to a dollar, for now i am still enjoying afcon win.
PF have no ideas, they are so ignorant.
You know what is interesting is that PEOPLE LIKE YOU WITH AN ARSENAL OF IDEAS ARE NEVER IN OFFICE. They are always on the outside looking in. And even when they offer criticism, it is not constructive. Isn’t this a travesty?
I just like this turn of events. I really enjoy this. We call it backfiring. When you say the kwacha circulating is fake everyone worth his thinking will end up buying the genuine cash like dollars, rands and the Euros using the fake kwacha and keep the genuine cash. The Zambian leader said the Zambian currency is fake so whats the surprise all about. All Zambian money is fake and clever people are busy buying genuine cash. Thats what happens when you use your mouth carelessly. PF just shot themselves in the foot and are now busy putting out the fire that was started by their leader! Just enjoy the drama guys. I end here!
A “strong” kwacha only favours importers of goods, exporters are hurt by this “strong” kwacha. That’s why China deliberately keeps its currency “weak” and is the most powerful economy in the world
strong kwacha favours exporters and not importers.what do we export from here were even some foreign currency is localised? less that 1% i guess from copper
“Strong” kwacha means less tourism, less exports
You will find that our main export (atleast 80%) is copper and it does not exactly abide by those rules. If the kwacha is completely trash it does not necesarilly mean that translates to exporting more copper.
Mushota
your second point is tight!
One of the determinants of our current economic vision can qualitatively be determined by our local currency strength against major world currencies. The point raised by Prof. Saasa is akin to factors affecting our economy. The economy of any nation responds to what’s happening in a country which simultaneously triggers economic value attachment to national activities by its government. The change of the national management through an election as Prof Saasa said, contributes to the economic uncertainity that has not received clear economic agenda of re assurance. The economic reforms promised are without any road map to ease the jitterly in the nation.Stakes are high in a lot of areas and continued failure to address these correctly will attract further depreciation of the Kwacha.
How, specifically, does this impact the economy of Zambia. “Any country” is too general. I am here wondering which particular entities are hesitant to do what they should in to re-energize the Zambian currency. It is easy for me to identify these entities in the USA, but here in Zambia, I get a little lost. Please help somebody.
There is need for radical measures to be taken such as Quantitative Easing by government aimed to boost efficiency and inject funding in productive areas. Government has to develop a structured policy in those responsible to comment on the perfomance and growth of the economy, investor confidence has to be reinforced while haphazard negative financial commetry without basis should be avoided. Gaining power in a country, is only a part of the art of politics but perfomance is its yardstick worth the team in power.
SPOT ON
Currency devaluation in itself is not too bad after all depending on what kind of expansionist policies a government in power is pursuing. For instance, the Chinese embarked on an expansionist path that included keeping wages low and devaluing their currency. In twenty (20) years they managed to pull 300 million people out of poverty into the middle class. Their economy became the fastest growing economy in the world and today is the second largest economy. Last year alone, they created more billionaires than any other nation in the world. So, it all depends on what you intend to do in your economy, a weaker currency makes exports more attractive and can increase productivity.Â
One other important point has to do with hedging – a risk aversion mechanism. With the coming of a new rebased Kwacha, those with enough cash on hand, would start exchanging their ZMK into hard currencies, this would increase demand for hard currencies and has a negative effect on the local currency as it it would be devalued in the process. A rationale maybe in people’s psyche that tells them if they had too much Kwacha they may not be able to change it into the new notes soon to be introduced. Thus to protect their current assets, they may start converting it now and with only three trillion in circulation against so little forex, the local currency maybe affected only to stabilize afterwards. So, fiscal policy is a complex central bank item that rides on several variables.
I thought monetary policy was the baby of the central bank and not fiscal. The rest of your argument resonates with the general consensus though.
PF should fix this economy instead of busy answering ever HH says. otherwise, Chipimo is taking over in 2016. We are tied of you tactics PF, please settle down and start working, here is your first task.
Good evening
In addition to the points raised by JJ Muzachiona and Amayama, I can also say that the World Bank, IMF and other institutions which continue to lend money to the nation on their terms also contribute to the weakness of the local currency. It is only when a country is fully dependent on itself that it’s currency will be stable. Prof. Saasa should therefore be advising the government on how to sustain the economy without relying on these foreign institutions.
Another problem is that Zambia’s economic growth has been hampered by corruption and by heavy reliance on Copper which has been sold under it’s value for a long time. Against this background, it will require more than a mere transfer of reserves to stabilize the local currency.
There can be economic growth that is jobless and without poverty reduction as the case is for Zambia and Nigeria.
Nevers Mu mba is a lia r and a mon ey lau ndering ma chine
Him and the de puty Mr Nz oya are ste aling tax pa yers money. They had fired Mr Tem bo beca use he knew about this sc am and was aga inst it. They also have a office slut , Caro lina Rod- riguez who is also abus ing the money. The Ottawa Zam bian mis sion are th ieves
We don’t need a weak or a strong kwacha, we need a stable kwacha. All these unbudgeted for programs are killings our currency. This Chikwanda guy does not seem to have a clue being a finance minister in 21st century.
This is a combination of MoF and BoZ. In fact more BoZ than MoF.
#2, if what you say has nothing to do with economics, then what do you think is economics?
#28, Hon Chikwanda Minister of Finance, and acting President when MCS is away :-), is just a minister, his job description is to implement spending decisions that are made by other people. Could hardly blame a guy who does his job as per prescription.
You can’t put new wine in old wine skins.
We need new brains in this modern world.
Crude oil prices going up. That means increased production cost.
Any measures by the govt to handle economic shocks?
Zambia needs clear fiscal policy up to now I still do not know what they are so we can be able to see and judge and comment correctly, can someone please help e.g what is our target for inflation and interest rate, what is the position of our current account, balance of payment…..does anyone know our PPI reading…please shade light anyone
Do the mining companies externalise copper proceeds, profits, or dividends only? If they do not hold their foreign trading accounts with the Bank of Zambia in common with what ZCCM used to do, then we have a problem which the BOZ should immidiatelty attend to. Let all exporters bring back sales proceeds to Zambia and only accesss their foreign currencies when importing machinery and expatriating Diiudends, rather than than allow them to externalise sales proceeds as the case may be at the moment. This way exports will have positive effect on the exchange rates! WAKE UP BANK OF ZAMBIA!
In the mean time, please start offloading some of the foreign reserves onto the market, as that is of the purposes of accumulating such reserves after all.
Can you say “CAPITAL FLIGHT”?
I AGREE WITH CHIPIMO WHEN HE SAID PF WERE NOT READY TO GOVERN. HOW DO YOU ANNOUNCE CHANGE OF CURRENCY IN ADVANCE.
Excuse me if am wrong but I do not think burying of money by former politicians is the cause. There is more than K3,029 trillion in circulation today, even if there was K300 billion money literally buried somewhere and these people rush for forex I do not think it would cause such a massive change as the one showed by the depreciation of the kwacha. I believe it would more likely be due to the governments stern stance on foreign investment and speculation by large corporations.
Just my thoughts.
It is true depression of kwacha has nothing to do government policies there is fake money all over particulary in lundazi where zanaco recorded fake notes from depositors, source of these seem to be mmd supportors. Facts at zanaco lundazi.
Thats what happens if you go flat out threatening investors,they hold on to their cash? The burrying of money is so useless the reason just like the BOB vs BOZ 3 trillion story.
Prof.Oliver Saasa is an economist?Since when?Anyway we all that Sataconomics is a disaster for Zambia.We only have ourselves to blame.The kwacha could slide further.What of getting money from the reserve bank to prop the Kwacha?Maybe as a short term remedy.GOD SAVE ZAMBIA.
Do the PF cadres even understand what is at stake?Â
PF zealots can offers some explanation coz am not surprised at our direction.
Who is Saasa to comment on the economy anyway – the guy is NOT even an economist! he is a Sociologist, so just shut up bo Saasa! We know your mockery of a consultancy has dried up of work since MMD left power – leave economic analysis to qualified economists bo saasa
Hoarders of foreign currencies are now making their move.Usually foreigners are not patriotic to the countries they reside in if it comes to economics.Most of the times foreigners hold the local economies to ransom especially here in africa.
Is Saasa really an economist or just a politician in disguise? Â Zambia does not have enough reserves to defend the Kwacha. Â George Soros made a fortune in 1997 from misguided South East Asian tiger economies (Thailand, Indonesia, Taiwan, South Korea, Hong Kong, Malaysia etc) that tried to defend their currencies. To defend your currency you need more dollars than the rest of the World. Â The bottom line is that PF has consistently undermined and badmouthed the Kwacha as if it was mere MMD money and people have been listening. Â It is payback time. Prof then wait until Zambia has to compensate the Libyans and the Ducth for nationalising Zamtel and Zanaco; the bottom will then fall out of the Kwacha. Â Don;t panic just; you aint seen nothing yet.
We only have K3 trillion in circulation or $600 million.I am glad most readers have realized the nosense from Saasa cant work. We need to produce goods that willgive us more dollars.Produce 2.4 million tons of maize every year and export it at say $250 PMT your kwacha to dollar exchange will improve 50%.
Your suggestion to produce more is sound. But don’t focus on exporting what you grow. Grow enough to reduce imports. That in turn reduced the pursuit the kwacha has on foreign currencies. An import substitution policy perhaps?
has the president even noticed that the kwacha is nose diving. or maybe he is busy hiring and firing his human resource in record time, or maybe re-aligning districts, maybe renaming structures,or reposing some company, or checking for the fake kwacha notes.it seems that is all he has been managing to do. anyway who care! douche kubeba!!!!!!!
The kwacha has to be managed…and it is suicidal for weak currencies like the kwacha to be floated freely.Maybe the Rand is the only african currency which is easily tradeable on the forex markets otherwise the rest of the african currencies are not that tradeable.Thus the Kwacha should be semi fixed/fixed…like in the old days…! I know certain commentattors think this belongs to the old liberation war economics…
This calls for an economist to run the country. I see HH taking over as sata has run out of police ideas now.
Do the mining companies externalise copper proceeds, profits, or dividends only? If they do not hold their foreign trading accounts with the Bank of Zambia in common with what ZCCM used to do, then we have a problem which the BOZ should immidiatelty attend to. Let all exporters bring back sales proceeds to Zambia and only accesss their foreign currencies when importing machinery and expatriating Dividends, rather than than allow them to externalise sales proceeds as the case may be at the moment. This way exports will have positive effect on the exchange rates! WAKE UP BANK OF ZAMBIA!
In the mean time, please start offloading some of the foreign reserves onto the market, as that is one of the purposes of accumulating such reserves after all.
#49 I have never heard anything that resembles a well thought out economic policy out of H.H. Could you refer me to what the man has said written? I don’t want to judge the man yet.
I have come to learn that expecting any thing postive from the socialist party PF is no realistic at all. People we must tightener our bults again. We are in for a rough time again, just like it was in the Chiluba days. Sata has to come to terms with the way business runs. It is not ones best friends who gives business but everyone even those one disagree with. He has to stop Bembalizing appointments so we can have a good mix of people skill-sets to run this economy. No one tribe or clan has it all.
#52 i don’t know about other things you wrote but i agree with your first sentence. socialism is guaranteed to keep us together in poverty. just look around you