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Thursday, August 6, 2020

The appreciation of the Zambian currency is artificial-Professor Francis Chigunta

Headlines The appreciation of the Zambian currency is artificial-Professor Francis Chigunta

New Kwacha Notes

Renowned Financial analyst Professor Francis Chigunta has charged that the appreciation of the Zambian currency is artificial.This was In an interview with Pan African Radio Journalist Hermit Hachilonde.

Professor Chigunta who is the University of Zambia Development Studies lecturer stated that the kwacha has appreciated because Government has offloaded borrowed money to sustain it.

Professor Chigunta further stated that the ruling Patriotic Front (PF) should find proper alternatives other than implementing artificial solutions that may backfire any time soon.

On Wednesday Zambia’s kwacha hit a two-month high on Friday as a rebound in copper prices and a pledge by President Edgar Lungu to cut spending and support the struggling mining sector soothed investors’ concerns.

By 07h50 GMT the kwacha had gained 6.62 percent to 10.17 per dollar, its firmest level since September 23.

On Thursday Lungu backtracked from an earlier warning that the state would nationalise mines, pledging government’s support to private companies, while also announcing a raft of spending cuts in a bid to reduce a wide budget deficit.

“It is very encouraging to see that type of commitment from the president,” Africa strategist at Barclays Bank Ridle Markus said from Johannesburg.

Demand for the local currency also increased as mining houses looked to offload dollars.

“Momentum remains skewed towards kwacha appreciation. We could see the unit trade under 9.9 today,” the Zambian unit of South Africa’s First National Bank (FNB) said in a note.

“We have seen an increase in dollar flows on the market over the last few days. We expect more of these flows today and will most likely see mines come into the market in a bid to sell at the higher levels,” analysts at FNB said.

The kwacha has fallen more than 40 percent against the dollar in 2015 as waning demand for commodities from top-consumer China put the skids on foreign exchange revenues of Africa’s second biggest copper producer.

69 COMMENTS

  1. Hello Prof Chigunta. Dont waste your time trying to figure out how these guys have managed to turn around one of the world’s poorest performing currencies. Thats the power of prayer. It will go up to K5.00 per US dollar.

    • please don’t involve God in the mismanagement of the Zambian economy..the dollar is already lost value..it’s now trading at 10.5 to a dollar as of 15hrs..it’s true the only reason it gained is be coz the mines pumped in dollars to pay the retrenched miners.it’s not possible for this kwqcha to gain any meaningful and sustainable value as long as the fiscal policies are wrong and we have a

      huge budget deficit..this is reflected in the the 19% inflation rate.the highest since 2001

    • @One Zed One Ngwee, it’s global. Even Brasil which exports “teal” the local currency has appreciated. Just ask Kambwili.

    • I wonder if the same Professor would have given the same reason had the IMF’s $1 Billion been accepted. I bet he would have been signing praises to them instead. Well, in case the Prof did not know ZMK is now a trading currency on the global forex market.

      The forex market is the world’s largest commodity exchange worth $4.3 Trillion per day while the world’s largest stock exchange which is the New York Stock Exchange is worth $3.2 Billion a day. Our currency now plays in a market over a thousand time larger than any in the world.

      Thus, there are many more variable “most of which” are beyond Prof Chigunta’s pay grade. Huge players such a insurance companies, hedge funds and other thrifts play in this market and very small movements mean huge profits as pips are collected.

    • Zambians please you are not exporting much to sustain a strong kwacha.Lets work hard to turn things around ,a speech by Lungu will not turn our economy,neither will slogans.Produce,manufacture,increase exports.The Kwacha will strengthen when Zambians start working hard…don’t read too much into the slight rises and falls.And for goodness sake don’t use the name of God in vain.We have mismanaged Zambia..nothing to do with God…He has laws ..you break them you suffer the consequences.

    • Continued …

      These markets are also driven by speculation following fundamental analysis. What the President did when he held a press conference was affirming our economic fundamentals. When fundamentals are seen to be strong, technical analysis follows to beat test the currency’s strength.

      Technical analysis is the evaluation of securities by means of studying statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security’s intrinsic value but instead use charts to identify patterns and trends that may suggest what a security will do in the future.

      Then Sentimental analysis based on human psychology moves in, you can no longer lock the Zambian economy in a small box and no single monolithic approach works any…

    • Continued …

      Then Sentimental analysis based on human psychology moves in, you can no longer lock the Zambian economy in a small box and no single monolithic approach works any more. Our currency is global and therefore needs more perspective to reach viable conclusions.

      @ Ba Maharaji, you said and I quote “… Zambians please you are not exporting much to sustain a strong kwacha.” To the contrary when you are a prolific exporter you want a weaker currency that way your exports are more expensive while imports become cheaper.

      Look at the Japanese, they always want their yen weaker than a dollar that way a Lexus is more expensive in Dallas while a Mustang is cheaper in Tokyo … I thought I may help you there. Just that part the rest of what you said is true.

    • am just wondering!!! why is shi Tasila`s kwacha appreciating after jobs Cuts?? i dont understand this economics,,,, does it mean that those miners were the ones causing the kwacha to devalue???!!

    • In fact at the moment. there are only two African currencies trading in the international forex market. The South African Rand and the Zambian Kwacha … if only the smart people of the Zambian Enterprise knew what they had, none of them would beg.

      Stand and sign of Zambia, proud and free … make it the land of work and joy in unity it used to be because victors in our struggle for our land we have been. And we have won freedom’s fight!!! All one … strong and free!!!!!

    • I have this to say to blogger who just talk and talk and talk and politic and politic ……

      I have a huge bank balance of US Dollars which I will retain for six reasons:

      1. inflation will rise even higher after removal of subsidies on power and fuel
      2. the looming hunger from projected reduced food production in this farming season spells tocsin signs of rough times ahead
      3. the job losses and low production in the mining industries had yet to reach the nadir (rock bottom)
      4. the pressure on GRZ to continue unprofitable populist road projects will not abate
      5. the civil service wage bill will only get higher and higher as electioneering draws nigh wiping out an fiscal space
      6. the dollar denominated obligations from infrastructure projects and the payment of VAT refunds…

    • @ B R Mumba, Sr, You have talked a lot but I’m not seeing the point you are trying to put across. But I just wanted to say some of what you have written is flawed and misleading.

      1) Yes there many variables that influence the value of a currency, yes perception, based on what is said or not said, is one of them. In other advanced countries who says what actually come from economical fiscal custodians such as the reserve banks (equivalent Bank of Zambia), and not politicians;
      2) While you are right that many export centred countries would rather their currency is weaker on the global market, the reasons and the examples you gave in response to Maharaji are wrong. I would advise you go and check your economics export/import basics. In the simplest of explanations, people in…

    • Continued…In the simplest of explanations, people in other countries have to buy your currency to buy from you. Thus when your currency gets cheaper (aka “weaker”) then the price of your goods becomes cheaper for people who use a different currency. Thus they would want to buy more of your exports. For the most part, govts want to have a weak currency to help encourage their exports. The weaker a currency is, the more attractive that countries’ goods and services appear to others.
      Weak currency is also good for tourism.
      3) The only problem with this is that it leads to high inflation.
      4) Maharaji is still right that a country with no production and manufacturing is doomed as you will have nothing to make your currency more competitive. Your balance of trade will be in the…

    • Continued
      Your balance of trade will be in the negatives. This is a matter of supply and demand in the currency market… Currency movement has direct impact on Import and Exports. Since we import more than we export, depreciation in the Kwacha weigh towards hefty dollar bills.
      5) By the way where I live, I send money to Zambia using forex, but I usually have to send in US Dollars because Kwacha is not traded. So I’m not sure what you are on about the Kwacha ‘trading in the international forex market’.

    • @Ba Maverick:

      It’s hard help you understand real market scenarios when everything you referred to are simply hypocriticals. It’s also had to help you when you cannot even synthesize the simple fact that just because your currency is trading on the global forex does not mean whenever you initiate a transfer, conversion is effected in your local currency immediately.

      In short, a lot of what you are talking about is nothing but simple microeconomic theory. In the real world, such simplicity approaches are too narrow for real solutions. And yes the ZMK trades globally since last year. I guess that is news to you too.

    • @ B R Mumbai, Sr, it would be helpful to you, myself and the readers at large if you actually debunked what I have written with objective quality analysis, rather than the usual hollow talk. I itemised and numbered whati wrote to help you out. It’s about we engaged in quality and constructive debate on this forum.

      I still insist your ‘Lexus’ scenario is flawed, simple microeconomics or macroeconomics or not.

    • Ba Maverick:

      I literally don’t have to debunk anything for anyone myself included for that matter. I share things at will and my sights and knowledge are mine. Believe me, I everything I write here I can back with qualitative as well as quantitative objectivity.

      I don’t have to prove a thing and if you cannot comprehend a simple balance of payment theory that makes a Lexus cheaper in Dallas and a Ford Mustang expensive by simple currency manipulations why should I waste more time wanting to prove anything?

      My time is money and I spent way too much of my own money putting myself in schools abroad. I charge people money for consultations. No free bees for you.

    • Ba Maverick:

      Meant to say …

      “I don’t have to prove a thing and if you cannot comprehend a simple balance of payment theory that makes a Lexus cheaper in Dallas and a Ford Mustang expensive in Tokyo by simple currency manipulations why should I waste more time wanting to prove anything?”

    • I know of a lawyer who couldn’t perform and ended up opening a tavern. What is it we have heard about ZIALE exam?

      Get A LIFE

    • People who are insecure always want to belittle others. Its a way of trying to reassure themselves that they haven’t erred on their path.
      When I was at Evelyn Hone College doing pharmacy the people doing Hotel and Catering were referred to as waiters. After graduation these guys were hotel managers with lots of money. I’ve gone on to do my doctorate but I dont get the money that my catering contemporaries get.

  2. We are in a situation like this as a nation because Zambia has a lot of certified illiterates. We have a lot of professors and PHD holders in this nation without any innovation to their credit that contributes to improve forex in Zambia. All they know is to tell how bad things are or will be. Professor what have you done for this nation to contribute to national development? How many companies are you running that exports to earn forex for Zambia? All we know your profesing or is prophesying of doom for Zambia. Look how the Japanese, Chinese, Malaysian,Taiwanese,Nigerian etc professors have gone into private entrepreneurship to help the economy of their nations.I can guarantee you even if HH or Nawakwi became president today, these professors will still find something wrong with them…

    • Comment:@alungu work up and smell the coffee. He is entitled to his opinion yes but as a prof he should also give us sound solutions. is he just a fault finding prof or what? Why is it that all doomsday proffesors hail from southern province any way.

  3. I AGREE WITH U DOMINION ALOT OF THESE PROFESSORS,DEGREE HOLDERS ARE PAPER HOLDER NOT DEGREE HOLDERS JUST PLAYING GAMES ON COMPUTERS. EVEN THIS GUY IS CONMENTING LIKE THIS TO CONFORT HIS SPORSORS HH. ITS NOT A HIDDEN ISSUE THAT SOME HAVE BEEN PROMISED POSITIONS WHICH WILL NOT HAPPEN.WHETHER THE GAIN IS ARTIFICIAL OR NOT THE TRUETH IS ITS A GAIN.

  4. Exactly what I wanted to ask. People usually call him development expert, though even that is just because he is a lecturing. The man seems to understand very little about finances. He does not know whether to agree or disagree with Lungu on influence of Copper mines on our economy. You wonder what he teaches his students. Is it PF or global falling copper prices ba professor? If you do not know, better to decline to comment.

  5. You are right Jkalusa, they have been promised jobs, even those who have not been promised but hail from that region all think they can get all the jobs, you know their employment record

  6. That’s why they are so desperate to win so that all the jobs will go to them, they have already dominated most Departments, so they will just maximise on employing their kind. Beware all you who do not hail from the region, you will be left jobless, you will join your brothers on the street, vending

  7. Thats why I can never vote for HH coz his tribs.mates will get all the jobs and what will happen to the others. No these people, we have seen enough of their selfishness and how they take care only of their kind only. Can we take such a risk- answer is a big NO

  8. I just don’t pay attention to these pretenders. Always negative, if the BoZ has been pumping money into the money market to support the kwacha can they tell us where the government is getting that money since they have told us that the government has no money it has squandered all the reserves. Of course they will claim that it’s the Euro Bond kikikiki same old broken record. The PND cadres just have to say something to try and save face, and the more they speak the more lies they have to concoct. By 2016 they will either have run out of steam or they will be sounding defeated and untrustworthy. Fact is that the government has more experts than the UPND will ever claim, in UPND the only “expert” or “economic manager” is HH, the rest have admitted to be imbuli because only HH can…

  9. Yes they will be employing each other whilst you languish on the street, bcoz that’s their practice.
    That’s why we can’t vote for them.
    Imwe ba GBM just know that you are just being used. If they won they wouldn’t even look at you, remember the ‘only a TONGA can lead Upnd’

  10. Moneni nomba ba Professor, musebanya sana uyu wakubwta bwata nefyo tamwishibe. He is now seeing his overrated chances of Deputy Finance Minister diminishing by the day. Aluta continua Edgar, no jobs for these selfish ethnic groups. You other tribes who are being used by them, smell the coffee before it is too late. You are advised to just cross back now to your proper home, the home of united Zambians, you are welcome anytime, even midnight just call Mumbi Phiri and she will recieve you.

  11. but most economic dynamics could be artificial anyway. even the law of supply and demand is flawed with artificial pricing by cartels. there’s really nothing natural in financial markets other than utopia. prof’s artificialisation of the kwacha is based on asumption that reserves would deplete and once more bring the kwacha to its knees.but so what because with enogh balance of payments its normal to keep chasing the dollar til you catch up.and this is just as natural

  12. @ndobo and others,to help you with what could be a simple colleration between job cuts in mines and kwacha appreciation;retrenched miners have to be paid in kwacha while the mines earn in dollars from their exports. Therefore mines have entered the market,selling off some dollars not only to meet their own workers’ rentrenchment benefits but likely also to clear obligations with contractors whose engagements have been terminated due to the ongoing crisis. And then some contractors might have had their contracts pegged in dollars so they are selling dollars to pay off the workers they are rentrenching. This,coupled with other interventions,example injection of forex by BOZ can lead to the kwacha appreciating – at least for now.

    • So how does that relate to the song by shameless folks, including HH that it is Lungu’s incompetence. Have some respect for other people. If copper prices were good, mines would be contributing enough to keep the dollar rate in check. Therefore you must agree global pricing for copper is affacting our economy. Not PF and Edgar as Nawakwi and HH like singing.

  13. The tragic thing about the UPND and their tribal inclinations is that virtually all Southern intellectuals are on their side. I was terribly saddened by some of my very close friends from the south who boasted that they were going to take over control of strategic institutions when HH seemed to have a chance of becoming the next president after Sata during the January 2015 Presidential by-elections. I was further informed that key positions in all strategic institutions like the army, police, intelligence, the public universities had already been slated for some prominent southern personalities after the elections. It was quite scary for me and I was therefore very relieved when HH lost. It is this attitude by our brothers and sisters in the UPND which is working against them. If only…

  14. Just look at the names(Prof.Chinguta and Hachilonde) involved in this article and conclude why they are unhappy with kwacha gaining against US dollar!!these are bantu-botatwe who will never be happy with positive things from PF as that reduces chances for their tribal HH to win 2016 elections!!BA CHINGUTA,SOOON YOU WILL SEE KWACHA BELOW K7 AGAINST $ AND LOAD SHEDDING REDUCED DRASTICALLY THEN WE WILL SEE WHAT YOUR HH WILL BE DECAMPAIGNING PF ABOUT!!BRAVO PF AND GO ECL GO!

  15. The show is hosted by Hachilonde…..end of discussion. Lusakatimes is another upnd media. You are loosing next year!

  16. Let the professor understand that even the depreciation of the Kwacha is also partly artificial, mainly due to speculation.

  17. So, the whole of the professor opened his mouth to spill this nonsense? There are no alternatives that he can lay down here but just finds it prudent to just utter a completely useless statement.

  18. If you happen to see this same so called Prof.Chinguta, you may insult education!!!the man looks dirty and uneducated-amazing!!Govt must fire such lecturers from UNZA. Instead of him working and providing advice to Govt of the day,this Francis Chinguta is busy scheming for tribal HH!!!THATS WHY I AND ALL MY CLOSE PEOPLE WILL NEVER VOTE FOR EVIL HH AS WHY SHOULD ALL TONGAS JUST SUPPORT THIS MAN!!AM SURE THERE SOMETHING THIS HH HAS PROMISED HIS FELLOW TONGAS AND ITS HIGH TIME PEOPLE LIKE GBM,CANIUS BANDA OPENNED THEIR EYES AND MOVED AWAY FROM THIS HH!!HE IS A GREAT DANGER TO MOTHER ZAMBIA!!WHY SHOULD UPND FOLLOWERS GET SAD WITH POSITIVE NEWS FROM PF?IF THE ECONOMY GETS BAD EVEN THESE BLIND HH CADRES SUFFER TOO!!SO WHY ARE SO EVIL?PLEASE VOTERS REJECT UPND FOREVER!!

  19. Imwee bantu, Lungu is clueless and he just plays sojo with the most gullible and illiterate Zambians that are on the majority and have voters cards. Sata went on populist spending spree in the name of development and that’s why we are in this predicament. Lungu should put s halt to this nonsense and adopted policy driven initiatives. Blinded by populist loyalty he thought it was going to be easy. No wonder we go round in circles, too many id10ts in our country.

  20. Well said professor, getting excited about appreciation that lasted for a few hours with little or no effort from the government is foolishness. Let’s be real, a good economy requires work and knowledge I can’t even list five things Lungu and company have put in place to stabilize the kwacha. We can’t expect much when we have put in little effort, it’s wishful thinking, right now it’s too premature to get excited about appreciation of the Kwacha which we won’t sustain.

  21. What’s wrong with an academician voicing his opinion? Some are asking whether he has ever run an economically viable business? Does he have to be an entrepreneur to comment? How many of you are? He is a lecturer – that’s his job. Whether he is a good lecturer or not, is another issue. React to what he has said. Just as you all have the right to state your opinions/criticisms/suggestions etc. Every time someone with high qualifications comes on board to say something, a lot of bloggers do nothing but try to punch holes in his/her credibility. What’s the objective of that? Not every one can be in govt. or in positions of influence – this may be by choice, or career pursuit. If all professors run businesses or become politicians, who is going to teach?

    • I have not read any comment from upnd cadres . This only go to show that all these so called upnd cadres are tongas and see disappointed by their tribes mates prof useless article. Why should a party be supported only by people from one region. No wonder this party can never win presidency. 50% +1 literally means southern against the rest .

  22. Guest Is Asking Where is The Power Of Our Prayer Very Satani & Childish. Anyway God Forgive U Cos U Dont Know Anything,but wait And U Will Soon Know How Great God Is Both On U As A Person And What Will Happen To Blessed Zed. Never Try God Like That U Will Endup~

  23. If you don’t have any dollars on your corpus or in bank account , do the Honourable thing : stay in your impecunious zone and don’t comment!!

    Why should the poor yap on fcy matters?

  24. Musankwa, who do you think you can hoodwink? Without tribe UPNd cannot exist, it’s like fish and water. The sad thing is that you do not know is that your tribes mates in government positions play the tribal card openly, so while you are trying to hide the tribal bit your colleagues are doing the exact opposite and what matters to us is that we work among them.

  25. Musankwa, the poor logic of you and your colleagues is amazing. Northern is UPnd? you smoking something from Green Party? Everyday without fail tonga s insult bembas and vice versa. Tongas continue to insult bembas even with GBM being your Vice President. gBM sees and reads this every day. He feels it everyday foR it is deep rooted.
    Take my advice mate, either GBM hopes to do the impossible by dreaming that he can take over UPNd leadership or he will do a prodigal son on UPnd when he comes to his senses. I am still waiting for GBM to utter the words that “it’s time for a tonga to rule this country”, when that happens I will be convinced that there has been a fundamental shift in upnd politics.

  26. u will keep on insulting each other but the truth remains,hh can not win elections in Zambia unless somewhere else.Mind you follow Zambian politics very well and u shall find the answer my brother.Ask miles sampa,Gbm,wynter kabimba,guyscott and others you will see that Lungu is very smart

  27. The economy lacked capacity to respond to two deficit areas, namely electric power and copper prices. These deficit areas can not be improved as long as economic diversification programs (infrastructure, tourism, agriculture, manufacturing) to supplement copper mining are not sustained. However, the same old vulnerable but high standard is just around the corner.

  28. Anyone with half a brain knows it’s temporary. But the reassuring thing is that he gave direction. All these threats of nationalisation or exchange controls were making the situation worse then it would otherwise have been. And finally the head is out of the sand. And reading between the lines it’s like the IMF left a to do list and the president is doing. They will be back in March to check that the homework is done and reward us with a billion dollar loan. Hooooray. Thank you PF.

  29. AGONY is when you see God’s hand, where there is none.Just chasing the wind while watching from the terraces and enjoying roasted mbeba,grilled water monitor,chikanda and chibwantu drink Lol

  30. ITS LIKE THE OPPOSITION ARE HAPPY WHEN THE DOLLAR IS TRADING HIGH, WHATS WRONG WITH YOU PEOPLE, UR HAPPY WEN OTHERS ARE STRUGGLING TO MEET THE DAMANDS THAT COME WITH HIGH EXCHANGE RATES. LUNGU GO ON MR AS THE LARGER PART OF THIS COUNTRY IS ON YO SIDE, EVEN IF U WIL BY 1 VOTE NINSHI U HAVE WORN, NO 50% + 1 THAT IS FOR 2021 WEN WE EXPECTING HH TO BE GIVEN A CHANCE BUT EVEN THEN U WIL STAND A BETTER CHANCE OF WINNING AGAIN

    • Actually, to the contrary sir, it’s now after the Kwacha has gained on the basis of austerity measures that pipo will experience a much higher cost of living with high Electricity tariff and impending hike in Fuel, etc. This has been part of the opposition’s concerns

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