Government has warned that it could resort to foreign exchange controls if the free fall of the Kwacha continues.
Special Assistant to the President for Press Amos Chanda stated that President Edgar Lungu will not allow the Kwacha to collapse because of what he called a false belief in a free market economy.
Mr Chanda blamed the rapid deterioration of the Kwacha to speculative behaviour by some market players.
“What we have seen is that from the time the Kwacha was around 8.5 to a Dollar, all the movements upwardly have been influenced by speculators who are holding off,” Mr Chanda said.
He was speaking Sunday evening when he featured on ZNBC TVs Sunday Interview programme.
“We are not yet at a point where we could think that the financial markets have broken down irretrievably. We think that speculative behaviour by some players has put the kwacha under pressure,” Mr Chanda said.
He added, “Because for the long time when contractor and other producers were unable to be paid by government there was cash problem in the economy but we don’t think there is cash problem for both for the dollar and the Kwacha.”
Mr Chanda explained that the problem was that in some circles there was sentiment that under no circumstance would government intervene to arrest the free fall of the kwacha.
“But am here to state that the President cannot allow the national currency to collapse because of the false belief in free market economy fixing themselves even when things are clearer that the market won’t fix itself.”
He added, “So the President could intervene through the treasury off course, allowing the central bank to regulate if the markets don’t behave properly, there are exchange controls as a measure.”
He said exchange controls means that restricting key sectors of the economy access to foreign exchange.
“Not to intervene as a matter of currency intervention, it is to restrict very essential productive sectors to have access to the dollar in order to have sufficient liquidity in the market, if that fails, that is why the Bank of Zambia keeps what is called strategic reserves, those strategic reserves are meant to protect the economy in an emergency situation, no options are off the table,” Mr Chanda said.
Asked if the Kwacha would go beyond the K15 to a US dollar mark, Mr Chanda emphatically said the Kwacha will not get any worse.
“The Kwacha will not get any worse than it is and if it does, like I have said, the government is not asleep and it will come in to ensure that there is reasonable equilibrium.”