Former Bank of Zambia (BoZ) Governor Caleb Fundanga says the long term solution to stabilizing the Kwacha is by increasing the country’s export base.
Dr. Fundanga’s advice comes in the wake of concerns by economic experts that the US$178 million the Central Bank has injected into the market to stabilize the Kwacha may only provide temporal relief.
Dr Fundanga said his idea of strengthening the Kwacha is based on the fact that factors that have led to its depreciation including the strengthening of the US Dollar and the fall in copper prices are beyond the country’s control and that the intervention the central Bank has made may not solve the problem.
Dr Fundanga said this is why he believes the long term measure is the diversification of the country’s export base.
The former Bank of Zambia Governor told QFM News in an interview that this is in view of the fact that nontraditional exports are growing with the latest statistics indicating that the country exported to a tune exceeding US$3 billion dollars compared to the year 2002 when country was only exporting up to US$200 million.
And Dr. Fundanga has advised that interventions the Central Bank makes in the country’s economy should not be by way of announcing what its involvement will be.
Dr. Fundanga explained that if for example the Central Bank announces what its interventions in the country’s foreign exchange will be, currency traders could take positions and buy the foreign exchange to depress the currency further more and sell the same foreign currency back onto the market.
He said this is why while interventions by the Central Bank are allowed, such interventions should be done in such a way that they do not alert currency traders.
And thats some brains right there !!! Talk about an accomplished economist ! Not abaiche abena HH ati economist.
You are really obsessed with HH huh. Tell your chi illiterate president Sata to appoint Fundanga n not damaging our country through appointing members of his dull family forest
An accomplished economist is HH who is worth US$100million (Sata confirmed this) and not a man who depended on a government salary.
Whatever the case, Dr. Fundanga’s statement is valid and explains facts.
It doesn’t even need an economist to see that, you can’t be spending more you are producing. It’s simple maths bane .
@LORD VOLDEMORT, Go and take your meds brother and crawl back to your trailer coz the last time i checked HH was worth a mere $8Million.
It’s obvious that the main problem is Zambia’s dependence on one commodity to supply foreign currency needs. This is a precarious situation. Depressed copper prices means instant financial problems for Zed. Zambia is like a stupid guy who puts all his eggs in one basket and starts running fast down a tricky mountain road and praying he doesn’t slip and fall. After 50 years of so-called independence Zambia by now would have had a diversified robust export oriented economy that generates forex through a variety of industries, not just copper mining. This is just insane!
its very true Dr fundanga we cant always depend on copper.Lets learn from our neighbour Malawi,they dont have copper or any other mineral but they have strong kwacha as well as relatively strong economy.
what is the problem with us?
At one point in 2003,kwacha traded at about K3 to $1.the questions are; who was the bank governor/depute governor then (qualifications),who was the minister of finance then.who were the technical people at both the BOZ and Ministry of finance?Lets consult these people they may be of great help.
The confidence factor should be taken on board too. Residents should have confidence in their currency as not to take positions in foreign currency especially our relatively well off Zambians of asian and european origins.
We should promote value addition rather than exporting raw materials. We give away too much value which we end up paying for at a premium price thereby robbing the economy of the much needed forex and investment resulting in diminutive GDP growth. Just for compare these stats; America’s one day GDP is equivalent to Zambia’s two year GDP. And RSA GDP is 20 times bigger than Zambia’s. You will find in these countries value chains are highly developed; That’s the reason Zambia imports anything from breakfast cereals to cooking sticks from RSA, when we can easily manufacture these items, given the vast natural resources [Trees] and abundant maize required for the mentioned items.
In zambia we have craftsmen who make cooking sticks. How do we go about getting their product to Shoprite? Shoprite can carry that product onto other countries.
Personally Im blaming the country’s economists for being selfish with their knowledge. What are they doing? Im very much aware that an association of these economists exists. I believe it is possible to put out a public statement based on proven economics to redirect the current state of affairs through counterparts in GRZ. At least if this is done, when things come to the worst, the association can say “we told you so”. It is called fixing things. One doesnt have to be in the spotlight to fix a problem. Pls show true patriotism in the midst of the chaos and save our economy.
which government will listen to those economists?
Its better to give pointers and if they dont listen … well good grounds to hold them accountable even possibly charge them for negligence.
I too thought the announcement by the Bank of Zambia that it had intervened in the market was not a wise thing. Maybe its time to check the BOZ . because that announcement just alerted speculators who now start frantic buying and holding long posistions in the market. this is going to result in more pressure on the kwacha. maybe its high time some people got fired.
You are correct.
In fact the vultures are waiting to pounce as soon as the BOZ offloads fcy on the market. BOZ operations must be covert to punish speculators on a sustained basis.
It is possible to ‘kill’ speculation as our market is very small. This sky rocketing exchange rate will take our country backwards whatever your political leaning might be. This is not a time to rejoice. It would be like husband and wife not attending to a fire in the children’s bedroom because they are quarelling. The sane thing to do is to stop fighting, even if momentarily, quench the fire and start the fracas if you are still ‘mad’ at each other. Same should happen to our politicians.
This constant ‘fighting’ is scaring the market.
I think every Jim & Jack now understands that a diversified economy with its attendant wide export base is the long-term solution to economic shocks.The next item on the agenda now must be “”How do we begin to diversify”.This is one cardinal issue I would like political parties to engage themselves on and not the perennial insults we are subjected to everyday
I think there is nothing wrong to announce BOZ interventions if you can mop up Kwacha in tandem
well said Sibwelo! this is a lose lose situation. but from the way the curency has been bahaving more like a seesaw, you can tell speculators are buying and selling one day after the other. and someone with a PHD goes and announces that they have offloaded money on to the market? the kwacha dipped to 5.9 the next day. Speculators went and bought at 5.9 today its 6.2. they are smiling.
I believe diversification is key but its a long term issue that need commitment and at the moment i think the Zambian electorate is too inpatient to have that they want quick gains and results between 2003 and 2006, Mwanawasa tried to diversify, I remember the pressure He was under and called all sorts of names becuase it was hard to see results.
These are the people who’re suppose to be in those offices.
Time Buying Selling
09:30 6.1539 6.1639
12:30 6.1964 6.2064
15:30 6.2556 6.2656
Time Buying Selling
09:30 6.1539 6.1639
12:30 6.1964 6.2064
15:30 6.2556 6.2656
Time Buying Selling
09:30 6.1539 6.1639
12:30 6.1964 6.2064
15:30 6.2556 6.2656
Today alone the kwacha has depreciated by 1.65% between 09:30 and 15:30. This makes sad readings. I think investor confidence is also playing a part. Our Government doesn’t seem to instill confidence, the ministers all seem to be docile. It’s also strange how Bob Sichinga, once upon a time a vibrant politician in UPND, seems to be clueless. Even chaps like Kambwili and Miles Sampa seem to be performing better than him. I have now concluded that being a sweet talker is not what it takes to be an effective leader.
That is faster than the rate of depreciation of the Currency of the crisis hit Ukrainian according to Bloomberg news!
I can also predict one Zero will be posted to the Kwacha in the next month and the credit rating will dive as well meaning Chikwanda and his nephew could finally stop borrowing as no lender will give us the money! The saying “Easy to destroy than build suits well to our current situation”.
Without a clear path for our constitution investor confidence takes a dive
Dr. Fundanga explained that if for example the Central Bank announces what its interventions in the country’s foreign exchange will be, currency traders could take positions and buy the foreign exchange to depress the currency further more and sell the same foreign currency back onto the market.
The big question is, how does BOZ do that quietly without the same Zambians who are trying to sabotage their own economy accusing the central bank of not being transparent.
Fortunately our Engineers don’t even need re-invent the wheel! All they need is to reverse Engineer. We can be identifying products to work on one by one. For example if we think we are spending too much foreign exchange on a certain kind of vehicle or machinery, we zero in on that particular product. Even if it takes a bit of time, its worth the effort and it will pay off later other than doing nothing.
Dr fundanga should give practical examples what he means by increasing exports because even mere mortals know this. Export what, and by who? Is it by the government or the private sector?
That’s the main problem – you always want to be spoonfed. Someone has given you the blueprint to success and you want him to carry out the plan for you. Why don’t you see yourself as part of the solution?
For your own information, a country with a tropical climate like ours can grow, produce and export everything that the people in the western hemisphere so badly need but cannot produce. The list is endless.
I have practical advice to jump start exports. The ZRA must immediately stop the application of the draconian VAT rule18 for exports into the Congo.
Currently exporting to Congo is almost impossible because of the ZRA. Ask the people who export lime, cement, beer, maheu, sugar, etc to the Congo. They are all facing huge VAT bills on exports. Insanity.
Nine Chale. We already export this and that besides raw copper, but the issue is that the net value of our exports are very low compared to our imports. We also import things we ordinarily should not, like tooth picks, cereal, fruits and so on. The missing link is the Engineering connection. We should make use of our Engineers to produce most of what we need. I am not talking of micky mouse kind of things like the manufacture of mbaula or what. This implies mobilising Engineers and challenging them to make stuff, provided all incentives and resources are made available by government or private people with money. If we can throw money at people who just seat and discuss like Technical committee drafting the constitution why not on Engineers who will produce something tangible ultimately.
Nine Chale. We also export things like sugar, cement and so on, but the problem is we were duped that if every company is in private hands (especially foreign private hands) then everything will be fine and the kwacha will be strong. But I understand these people choose to bank their money outside Zambia and just bring a little to sustain their operations. You get screwed if you rely too much on other people to do things for you.
Fortunately our Engineers don’t even need re-invent the wheel! All they need is to reverse Engineer. We can be identifying products to work on one by one. For example if we think we are spending too much foreign exchange on a certain kind of vehicle or machinery, we zero in on that particular product. Even if it takes a bit of time, its worth the effort and it will pay off later other than doing nothing.
What Fundanga is saying has been preached from Kaunda’s times. It even gave birth to KK’s half-hearted attempt at agrarian revolution. It didn’t work because Zedians dont only have the patience for farming the state didn’t give them the required support. My only bone to pick with Fundanga is why he never gave the same advice to his President.
Spartan I guess you are an engineer. I wish I could engage with you one to one on why it is difficult to make things here in zambia. A number of people have tried to make things like stoves fridges and geysers to name a few in this country. The zambian product will be two or even three times expensive compared with the imported similar product and so consumers will go for the imported product. There are other ways the country can diversify without even producing tangible goods. One way medical tourism. Build state of the art hospitals and offer services which our neigbours do not offer. people will be pouring in for the services like we do going to south africa. Tourism itself local and foriegn. All we need is to guide eligable Zambians ensure they get the required financing. Your thoughts
Yesterday, in response to the story that, ” Bank of Zambia Moves to Explain Depreciation of the Kwacha “, these were my exact counter words, below; ( I am not an economist, but I think I am in a way vindicated by Dr Fundanga)
” The Zambian economy is still a ‘one trick horse’. Dependent on copper. As far as I am concerned, all we need to do or needed to have done all these years was to manufacture our own goods, from our own abundant local resources and export the surplus. I mean real manufactured import substitution goods – not just chillies and flowers.
The situation will be even more dire when our ‘one trick horse’ becomes lame due to the arthritis condition it has started to exhibit on the world performance stage”