Texila American University Head of Business says in order to create stability in Zambia’s currency, there should be better management of external debt. Dr Agape Kapasa said with the recent revelations by the Bank of Zambia Governor with regards the depreciation of the value of the Kwacha, management of external debt should be a priority in order to boost investor confidence. He said in addition to that, there should be a boost in the nation’s exports, an increase in total productivity and inflation rate should be lowered.
Dr Kapasa said that in relation to foreign debt, there was need to go back to the drawing board to analyse how the nation can domestically service its external debt through the sale of domestic bonds. He bemoaned the potential loss of foreign investment as Zambia’s market seems risky to invest in by the global market, thereby leading to higher inflation. He has since called for a moderate increase in money supply.
Dr Kapasa further called for substantial increase in the country’s exports in comparison to imports. He said there was need to reanalyze the nation’s trade agreements and create strong export industries within Zambia. He added that an increase in exports means an increase in revenue, which then translates to an increase in demand for the local currency, therefore causing an increase in the value of the Kwacha.
Dr Kapasa warned that the long-term impact of inflation could be more damaging to the standard of living in Zambia than a recession. He said even though expansionary monetary policy is effective in adding more liquidity in a recession and results in a boost to economic growth by lowering interest rates, over a long period it could lead to high inflation. He has therefore recommended that a national timeline be created for detailed analysis of necessary changes.