THE Bank of Zambia (BoZ) has attributed the recent appreciation of the Kwacha to the introduction of the statutory instrument (IS) number 33 that prohibits transacting in foreign currency for domestic transactions.
The Kwacha is now trading between K4,800 to K5,000 for dollar from the highs of K5,300.
BoZ International Reserves Management manager Kombe Soteli said the introduction of the SI number 33 has contributed to the increase in foreign exchange supplied on the market, hence contributing to the appreciation of the local unit.
“With the SI in place, we have taken off the artificial demand of the dollar that was there. All the companies or individuals that were paying services in dollars are complying with the policy,” she said.
She said this in Lusaka at the just-ended 86th Agriculture and Commercial Show .
The IS 33 was introduced to restore the use of the Kwacha as the main legal tender of the country to control the use of foreign currencies in the economy.
Ms Soteli said the reinforcement of the use of the Kwacha in the economy will make it easy for the central bank to implement monetary policy and control the amount of money available in the market.
“The appreciation of the Kwacha is just an effect of the implementation of the SI 33… Our function with regard to the exchange rate is not to fix or target a particular level, but manage the volatility that will help us have a lower and stable inflation rate,” she said.
She said the core objective of the central bank is to achieve and maintain price stability.
Commenting on interest rates, BoZ deputy governor Bwalya Ng’andu said average lending rates applied by commercial banks have reduced to about 19 percent following the introduction of the policy rate in April 2012.
Dr Bwalya said the central bank is currently conducting a survey to ascertain response to the policy rate by commercial banks.
“It is an issue we are dealing with and we are hoping to get more banks comply…as the central bank, we feel that the level of competition in the banking sector has not improved as it should be to further lower the cost of money,” he said.
He however hoped that the reforms being undertaken in the financial sector will stimulate competition and reduce current averseness to risks.
“The reforms undertaken in the financial sector are ongoing and we don’t expect them to produce measures immediately. The idea is not to have a lower interest rate but it should represent economic activities of the country,” he said.
[Zambia Daily Mail]
The Kwacha trading at only K4800-5000 to the $ cannot be attributed to the new Forex SI. If we are to believe that the increase in the value of the Kwacha to the $ by only K300 – K500 is as a result of the new S I, then really what affect has it had? Surely if the non trading in the $ in our economy can only affect the Kwacha by such a small amount then there is nothing to shout about, however if the Forex exchange rate had changed to K3500 – K4000, then we can really attribute it to the new Forex S I.
What load of crap. What kind of analysis is this? Dude, stick to your major and let economists and financial managers do the analysis. How can you afford to say nothing in so many words?
Iwe mwana You know how to put it! Ha ha ha ha ha ha ha ha ha!
Economics manipulating the kwacha artificially then parting each other on the back!!!!!!!
The natural equilibrium for the kwacha is above K5,000. Wait and see.
And yet without the ban on the use of USD, the mmd govt achieved an exchange rate of 1 USD to zmk below 4800. Satanomics won’t take the country anywhere!
“Cheap Politics” Thats Why Africa will remain in Poverty. Right now some EU countries are going through Economic temoi because of such politics, we don’t need politicians to run the Economy, what we need are Technocrats…Africa my africa your leaders have exchanged you for Salt & Gun-powder.
If the Central Bank had not intervened after the introduction of the SI33, the rate would have reached K3500. But remember both exporters and importers have to be protected and indeed the forex denomited budget support.
BOZ has lost credibility these days. You guys should stop guess work!
Most Countries in the world do not allow the the use of foreign currency for local trading. It is time for Zambia to start making such decisions that benefit the locals other than always boot leaking foreigners.
BOZ Deputy Governor should tell us more about the banking of export proceeds – do they still continue to be retained abroad or are now held at BOZ, subject to any letters of credits for purchases and other externalisations?
In Kenya, Tanzania, Botswana, Namibia etc hotels, lodges etc still accept payment in dollars and euros. The strength of a local currency depends on productivity, degree of political risk and policy stability in a given economy. Political engineering of a currency cannot take you very far.
What he means is that if MMD had implemented the same SI, the Kwacha would have been trading at 4200 – 4400. I miss MMD already
and you call this Satanyomics at its best. lets face it there is just nonsense in all this. MMD managed to keep the kamadollar lower to the kwacha even without threatening anyone. Now in the midst of all threats and insults you still find the dollar trading at over K5,000. it just does not make sense. I rest my case!
Zambians, Zambians, Zambians – Always criticising especially those shouting from ashore. You can’t appreciate anything positive about your country. Some of you live in the UK and the rest of Europe, Americas etc. Do you see those countries using foreign currency to trade locally. A success case is South Africa, the Rand is the only legal tender. Infact people will not accept US$ because the don’t know it. They believe in their currency and that instills confidence. We have un-educated economists on this blog – Please Take Your Arrogance Ukokwine.
point of corretion:::::::: take yo ubututu uko kwine. true in developed countries they dont use foreign currency.. but zambians are he dullest.
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