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Kwacha Depreciation Due to Low Reserves caused by debt servicing and low production-Finance Minister

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Finance Minister Dr BWALYA NG'ANDU addressing investors from North America, South America, Europe, Middle-East and Asia, at an Investors Forum held at the Hay Adams Hotel in Washington DC, USA
FILE: Finance Minister Dr BWALYA NG'ANDU addressing investors from North America, South America, Europe, Middle-East and Asia, at an Investors Forum held at the Hay Adams Hotel in Washington DC, USA
Finance Minister Dr BWALYA NG'ANDU addressing investors from North America, South America, Europe, Middle-East and Asia, at an Investors Forum held at the Hay Adams Hotel in Washington DC, USA
FILE: Finance Minister Dr BWALYA NG’ANDU addressing investors from North America, South America, Europe, Middle-East and Asia, at an Investors Forum held at the Hay Adams Hotel in Washington DC, USA

Finance Minister Dr Bwalya Ng’andu has attributed the depreciation of the Kwacha against the US dollar and other major convertible currencies to low reserves caused by debt servicing and low production and supply in the mining sector.

Dr Ng’andu says the local currency has depreciated by 5.6 percent in November 2019 and by 17 percent on a year on year basis.

He said a sustained depreciation of the currency can lead to inflationary pressure, affect the economic growth of the country, increase the cost of servicing debt and raise the cost of doing business for companies.

Dr Ng’andu said the government has put measures in place both long and medium-term among them tightening the Monetary Policy Rate to help manage the depreciation of the currency.

He also noted the need to increase exports particularly the private sector in order to bring in more foreign exchange which is key in building the reserves.

Dr Ng’andu noted that being an import driven economy, the depreciation of the local currency is expected.

The Finance Minister was responding to Kapiri Mposhi UPND Member of Parliament Stanley Kakubo who asked him what the cause of the rapid depreciation of the Kwacha during the month of November, 2019, is and what urgent measures the Government is taking to stabilize the performance of the Kwacha against other currencies.

Mr Kakubo also asked the Minister what effects the depreciation of the Kwacha has on the economy and what measures the Government is taking to mitigate the adverse effects.

57 COMMENTS

  1. Please be inclusive and listen to Dr Habaazoka from EAZ’s advice. I read his article on how to best address the current economic challenges. The old school interventions may not be the best for a situation such as ours. As a start the mines should be compelled to Bank part of their revenue in Zambia. We export copper we should not suffer a shortage of USD Dollar supply in the country. Also you should have listened and replaced VAT with Sales Tax. Now you are running around trying to put out flames.

    • Dr Habaazoka said the Zambian economy was okay when all indicators pointed to an economy in free fall. So what credible advice can the Russian trained economist provide?
      He is just another puppet of the PF.

    • We didn’t need to import power. This country needs to learn that you don’t need to import everything.
      Awe naimwe.

    • And PF are in the process of borrowing $2 billion to connect serenje and chipata via railway plus more load shedding funtu….i think soon the kwacha will no longer be a teenager it will be in its twenties

    • ZAMBIA’S ECONOMIC MODEL IS ALL WRONG.
      TOO MANY SHOPPING MALLS CLAMORING FOR THE LITTLE FOREX TO IMPORT MORE AND MORE
      VERY FEW FACTORIES TO GENERATE FOREX IF ANY
      THE FOREX GENERATED BY THE ONLY CREDIBLE FOREX EARNER SHOULD BE WITH IMMEDIATE EFFECT CONTROLLED BY GOVERNMENT: THE MINES SHOULD RETAIN A QUOTA FOR OPERATIONS SPARES etc
      FARMERS SHOULD BE ALLOWED TO EXPORT MAIZE TO THE CONGO EARN FOREX
      LET US CONVENE A NATIONAL INDABA ON THE ECONOMY TO SET AN AGENDA ON THE ECONOMIC MODEL AND FORGET ABOUT POLITICS FOR A CHANGE
      FISCAL DISCIPLINE BY GOVERNMENT TO BE TOP PRIORITY
      AND NO MORE MALLS!!!

    • THE NEW POSH TALKING FINANCE MINISTER CAME WITH A LOT OF FANFARE!!
      MEANWHILE BACK AT THE FARM THERE IS GNASHING OF TEETH.
      WHERE IS HUMBLE MAGANDE?

    • @1.1, I think you missed the news from PARADISE PAPERS that when the little boy who took money to PANAMA dies, the tax evasion thief’s money will be free falling into the pockets of PANAMANIANS and other crooks who advised him to take it there. MUTINTA will hold a Press Conference in which she will denounce PANAMA and the friends MOBUTU once denounced at his deathbed.

  2. Everybody told the PF that the Zambian economy was in a crisis.They did not listen.
    Instead they blamed HH for speaking ill about Zambia.

  3. Oh ! The economy is in bad shape, i was meant to believe conspiracy theorists manufactured all those stories just to paint a bad picture about our beloved country. Debt servicing and low production(load shedding in short) the core reason for this mess.
    Am confused now, are we not planning to borrow $2 billion for a railway line to connect to two towns that hardly contribute a thing towards the GDP.
    If dumbness is a person or its absolute disregard for the country we serve

    • Here its how it works, when they get the 2 billion, they will divide it amongst themselves. Its common sense that we are going through a bad economy because of wrong decisions by pf, and see them thinking of getting another loan from china should worries us…because thats not normal.

    • @3, Let Prof. HANSONI who has no HINSONI write to the UN on his University Letterhead that Zambia and South Africa’s economies are in bad shape ”ONLY A TONGA CAN FIX THEM!”

  4. They were operating on a “too big to fail”. See your politicians and their adherent policy directors are comparing you to the nearest toilet in making decisions. If a very, very bad situation is not yet upon us they decide we are better. That is the biggest problem we have. Oh, that is what kakistocracy is all about – you compare with the lower not the higher…

  5. Welcome back to reality. Where are those who said the economy is doing fine. I guess the debt is attributed to climate change as well. If anything, do not even mention production at the moment and concentrate on how you will mitigate the increase in the debt cost because even if production was at full capacity, the debt financing cost is just too high due to reckless borrowing.

  6. The cost to the economy will be far more than if we just decided to import power. The cost of imported power will be less than the loss of production. An economy that is debt-ridden needs to be operational 24/7 if it is to survive.

  7. Maggie left the kwacha selling at 12.30 today the kwacha is trading at 14.40. some of you were excited when maggie was fired . see yowa lives now

  8. The Zambian economy is not on crisis, economic analysis should not be based on opinions but on fundamental economic analysis. We are still able to service our debt albeit under pressure and we are not without assets that can be leveraged to satisfy any lender for ability to pay and renegotiate. What is required is the balancing of reality and perception, as it stands we are not leveraging the mines income because of Tax evasion and what should be a big revenue earner electricity is offered at below cost. Tough decisions need to be taken on these two. Do away with VAT for starters and increase electricity tariffs. Also change your attitude to always wanting government to fail, it’s failure is your suffering.

    • Good to see how well you have described yourself, Wako. Ndeloleshafye is on point and has put a lot of reasoning and truth in his comment. You loud and uninformed bubbleheads seem to believe your opinions will change political leadership and hh will magically fix the economy-fundamentals and facts, baba!! Feeding your head with social media fake stories everyday won’t change the truth. What are we exporting that is suppose to bring us the dollars we need apart from copper?? It’s been like that since UNIP days. And when copper prices are down, is it because of PF when our economy gets affected??

    • Bro Citizen, the economy was doing much better during mmd than now. The country itself was doing much better under mmd than now. Farming, mining, business all aspects were doing fantastic than now. Than what do you think is the problem my brother Ask yourself. We need a change of government urgently as a country and even 2021 looks too far. Common sense says you vote the next most popular party which happens to be upnd. As citizens we are so desperate right now that we will vote for anyone but pf.

    • The economy was much better under MMD, why?? We had high copper prices which hit $10,000/ton, remember?? GDP was smaller and we had excess dollars. GDP is higher now and price is $5,000-i’ll let you do the mathematics. What is urgent is diversification from copper dependency. Power defecit which are not a PF created problem but MMDs are not helping, UNIP did its best by building power plants. Change of GRZ won’t improve these fundumentals will they?? South African economy is at junk status, Kenyan reserves are at lowest, China’s growth is slowest in 20 years-global economy is depressed and Zambia is not unique.

    • Two of the biggest experts, ndoleshyafye and zambian 1mbecile have crapped again in public.
      The stench from theirs wide open arshole becomes stronger as the leadership of Plunderers Federation starts to accept stark reality.

  9. For a long time I thought Dr Habazooka was just a PF cadre but his article was very insightful. I think Lungu should seriously consider Dr Habazooka as the new Finance Minister.

  10. The economy is in doldrums, the fake Russian economist is lost at sea with his flowed economic theories. We told you but you did not listen. The fire fighting Technics of trying to arrest the free falling kwacha will not work, being proactive is better than being reactive, it’s dununa time mappets!

  11. 1.Dr Ng’andu said the government has put measures in place both long and medium-term among them tightening the Monetary Policy Rate to help manage the depreciation of the currency.

    Monetary Policy cannot solve problems created by fiscal indiscipline and insufficient production of goods and services.

  12. The PF came to the scene lying to Zambians “more money in your pocket within 90 days” but all they’ve done is actually the opposite.

  13. Dola speak up mama. You were the loudest voice to counter us and you labelled us as not well meaning Zambians. I need to ask PF to show me why I should put my vote on ECL. For now all the books are in RED. Are we waiting for black Friday? Well! it does not just come without planning.

  14. Borrowed monies poured into consumption-based projects like useless universities in Luapula and Muchinga, millions of houses for police and soldiers, clinics and hospitals and sub-standard roads. Not even one investment in the production sector. Next step government is broke and is now chasing around IMF for a bailout to self-inflicted problems that HH and others warned you about. Debt servicing kills the kwacha, lack of production kills the Kwacha and economy and some scattered toothed !mbecile says ‘He is game for 2021’ If anyone deserves a massive kick to the balls its that visionless clown!

  15. Habanjoka has changed his song because he was overlooked for Finance minister. What kind of economist is he when only himself could not see when the the country was sinking deeper in debt? He was too busy singing praises to see any problem? Fukn njoka!

  16. I feel pity for Dr Bwalya Ngandu, what a time to become Finance minister!!! What a time to join the Poofs government!!!

  17. Many Zambians analysis of the economy is based on exchange rate to major currencies. EAZ should publish a 101 on economic theory management so we can all be equipped to make informed opinions. I was especially interested in Dr Habaazoka’s insights on behavioral economics as opposed to considering Keynesian economics as Law. Companies like Amazon are investing heavily in this area by recruiting economists that make sense of data on behavior patterns in formulating strategy. We need to do the same for Zambia. People laugh at Dr Habaazoka’s Russian training but don’t know that Russia has achieved Reserves of almost $600bn, fourth only to China, Japan and Switzerland. Meanwhile the USA and British whom you prize as dons have the worlds highest debt. Who should we be listening to then?

    • Bauze, Nde!! They make uniformed analysis based on hate and bitterness for Edgar Lungu. Meanwhile, Russians, Asians are progressing without the west. Ours are colonised opposition who will agree and support anything the white man says.

  18. Pathetic and gutless lies and excuses from these “officials” is the order of the day that greets the average Zambian everyday. Never any meaningful solutions. The real economy died a few years ago. Malls are not development.

  19. Mostly, debt management. We have always been low on production except where Investors increase copper output only to externalise the income and refuse to pay full tax. Now with the depreciated kwacha they get our copper for next to nothing ….that’s not going to I prove our reserves.

    All currencies are on a downward slope. A new gold, silver standard abandoning the USD standard is the right way to go. Paper money currency is hazardous. Whatever happens the govt should NOT be PRINTING MONEY.

    • The sad truth is we had to borrow (probably not so much), to grow our economy, create jobs, infrastructure and nearly all zambians have small land assets, thanks to the last 10 years. There was a great increase in home ownership a rise in living standards. New schools, universities have been built. All round the current govt has done very well. There has been an increase in corruption prosecutions….all good signs.

      Do a little farming and increase food production.

  20. The Finance minister Dr Bwalya Ng’andu was addressing investors from North America, South America, Europe and Asia. This was indeed an opportunity to woo and market Zambia.
    How much pledge did Zambia receive resulting from his address to potential investors?

  21. @Patriot Abroad
    “…A new gold,silver standard abandoning the USD standard is the right way to go.Paper money is hazardous.”

    The problem is at London Metal Exchange which defies and operates against the principles espoused by the father of capitalism, Adam Smith, in his book ‘The Wealth of Nations’.Currencies are backed by their respective underlying assets thus If Country A with currency B wants to trade with Country X with currency Y and commodity Z,then currency B from Country A must be exchanged with currency Y from country X in order to get commodity Z.Now,why does the Dollar,a local US currency,allowed to buy our copper directly by-passing the Kwacha?Is this what Adam Smith preached his book?Copper is the underlying commodity/asset for Kwacha.The dollar by buying the Kwacha…

    • The Dollar by buying the Kwacha in order to get Copper,then the Kwacha appreciates.Now why is this not the case?The Kwacha is not even allowed at where copper is sold i.e LME and you expect Kwacha to make any gains when its copper is being sold bypassing it.
      ?Currencies must trade freely even at LME.

    • I recall a certain David Punabantu ( i think) used to write some very informative articles and arguments about this same buying of copper in USD in the “Post” of the a decade ago. But it looks like President Nixon of the USA did his sums in the 70’s and hence this limbo we are in.

    • @Sharp Shooter (unfortunate moniker), the world monetary system is unfair, Sterling and USD are not the best monetary standard. GOLD/Silver are steady standards. Some countries are bypassing those standards by bilateral agreements. China, Russia, Iran, Japan, India all have traded commodities for Gold (copper, Oil etc). The BRICS group have considered the banning of USD for their own bilateral trades among themselves. 5000 years ago, Gold was used to barter. It’s currency that does not lose value through Global Economic fluctuations. Bretton Woods system ditched the gold standard which backed currencies with Gold and that’s now not stable nor fair. Plus adopting gold standard may crush Western banking systems with its unfair advantages. The unfair bonds sold to us may become…

    • Plus adopting gold standard may crush Western banking systems with its unfair aThe unfair bonds sold to us may become nothing more than paper if their bank systems crush! Liberating poorer countries in debt.

  22. As at now 23/11/2019 @01:17am the kwacha is K 18.45 to 1 British pound. Any way good rate to send money to my family in zambia

  23. Its good to read the divergent comments on why the Kwacha is so to the dollar BUT its not only only the Kwacha also the euro because of the rates movements the Bonds in the US have become more attractive therefore pushing the value Dollar against the Euro upwards and that contagion is having a downward feel on all currencies and markets that have to react like BOZ has in rates to ensure correction The net speculative investing in the USD has also recently increased as a result

    The other issue to address is the carry trade tactics of Indians and Chinese as they leave home with dollars during these holidays therefore pumping the exchange artificially and only to revert in January 2020…

  24. Normally the euro is suppossed to 1 to 1 to the dollar and therefore the cross currency rates for the kwacha follows reflecting the state and strength of the economics as exemplified in the exchange and interest rates movements (interest rate/yields differentials ). say for euro areas against the US and since Zambia reserve is Dollar You see those movements

    The good thing is that the kwacha will register some gains again and revert to its mean value

  25. Productivity and real GDP is what is needed to transform meaningfully peoples live-hood and translate on national accounts and balance sheets/balance of trades/Current accounts So every effort must now and for a longtime be directed towards growing that productivity and the economy

    Then simply to hold and not put up policy measures to raise the reserve balance sheet is simply not good enough especially in these risk stressful environments and out looks that requires quality and depth of reserves to navigate stressful environments
    One way to do it to increase the reserves to record levels is to do some REPO facility by BOZ allowing Financial Institutions to transform their…

  26. Treasuries into reserves on demand at an agreed rate that could be some basis points above the BOZ projected range or target to ensure its smoothly and operationally effectively run We could see then some fall in utilization of those reserves as banks and other Financial Institution ,including Boz, would prefer utilization of Treasures instead of those reserves and hold those for stressful periods you may encounter (headwind)
    What that repo rate is a matter of policy discussion not this rate we have on the window NOW the transmission mechanisms in those policies and rates has not be equivalent to the fall in reserves to ensure they are restocked quickly and adequately also

  27. Albert Einsteins, “you cannot solve a problem with the same thinking you used when creating it.”

    it’s high time the ruling government and the opposition unite ideas to solve the current economical challange. The rapid fall of kwacha is little bit scarely to our country leading to a sky rocket hyper-inflation.

    From my point of view, the importation of power from SA was just one form of increase the tax or the cost of electricity, but when we look at this from the consumer point of view, consumers will have less disposable income to satisfy their needs, “hence a call for hunger”

    what of those doing business which depends so much on electricity?

    It will be very difficult to stabilize kwacha if at all the tariffs on the imported goods are not increase to support local…

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