By DERRICK SILIMINA
BANK of Zambia Governor Danny Kalyalya says the Central Bank is concerned at the current rate the Kwacha is depreciating against other convertible currencies.
Recently, the Kwacha traded on a very weak footing and on closed at K12. 40 following the World Bank’s cutting of Zambia’s gross domestic product (GDP) growth forecast from 3.5 pe cent to 3.3 percent.
According to the First National Bank, the Kwacha lost its strength due to strong dollar demand which is likely to see the local unit on a depreciating trend.
The Central Bank governor attributed the current movement in the exchange rate to economic fundamentals such as the supply and demand being triggered by mining companies through the export of copper, cobalt and other minerals on the international market.
In regard to the treasury bill auction, it is said to have been poorly subscribed despite more than K1.5 billion in circulation; such that with K950 million on offer, successful bids only amounted to just K290 million.
Dr Kalyalya has affirmed that lack of investors in Treasury Bills has equally affected the performance of the Kwacha.
“We have hardly any investors in treasury bills as initially the concentration was about K8.5 billion equivalent in Government bonds. So that has shrunk because we used to have somewhere 17 or so percent.”
He further notes debt service is another major source of demand hampering the supply of the Kwacha on the local market.
“Our major challenge as a country is that we have characterised ourselves as importers, which means that it hurts us because when the exchange rate depreciates, you have to cough more kwacha for the same dollar you buy.
“This is a concern to us because it means that we have surrendered our lives to others such that what happens to China or the USA becomes our fate. Is that really the case? We have enough resources that we can exploit to our own benefit,” he observes. – Courtesy of SUMA SYSTEMS.