Tuesday, June 18, 2024

My Perspective on Why the Kwacha is Depreciating

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By Antonio Mwanza

This week has been dominated by discussions concerning the Performance of the KWACHA.

I have heard a lot of theories from politicians and my fellow Facebook Economists and Keyboard Warriors claiming all sorts of things about why the performance of the KWACHA against major convertible currencies has been weak.

Well, today I have decided to add my voice to this very important discussion. My response is based purely on research and empirical data.

1. PERSPECTIVE

Ever since the Government decided to start using the KWACHA as an official medium of exchange, Zambia’s currency has seen a lot of fluctuations.

At no point has our currency performed better than the dollar since it came into being after a government policy decision to decimalize the national currency in 1967 that saw the birth of the KWACHA and the NGWEE, replacing the Zambian pound, shilling, and pence in 1968.

2. WHY ARE THE KWACHA PERFORMING POORLY?

There are a number of reasons why the performance of the KWACHA has been weak recently. These include:

a) Lower Productivity In The Mining Sector:

The mines account for over 70% of all our export earnings. And the low productivity in the mining sector as a result of a number of factors such as the Covid-19 pandemic, low commodity prices at the international market, the on-going legal and structural problems with huge copper mines such as KCM and now Mopani have all contributed to reduced productivity.

b) Slow Growth Of The World Economy:

The growth of the global economy has significantly slowed with some of the major world economies heading into recession largely due to the Covid-19 pandemic which has seen millions of job losses and the closure and/or downsizing of major companies and production lines.

c) Droughts, Floods and Erratic Electricity Supply:

The continued load shedding is negatively impacting on production and productivity since most businesses rely on electricity for production.

Further, load shedding is pushing the cost of production upwards as people are spending more on alternative sources of energy.

It is important to note that Zambia depends highly on hydropower and the droughts we have been experiencing mostly in the Southern part which is our major source of hydro power has created a huge electricity deficit resulting in the current load shedding.

We are happy that the Government has Continued to diversify the Energy sector to stop over-reliance on hydropower. In addition, the massive investment of around 3 billion dollars which the PF Government has injected in the energy infrastructure development will ease the pressure once these projects are concluded next year and beyond.

Further, the upward adjustments of electricity tariffs to cost-reflective ones will attract the private sector to invest in private power energy projects hence increasing electricity generation and cutting down the energy deficit.

The PF Government has put so much emphasis on Agriculture as we aim high on diversification. This sector has been hit badly with droughts in Southern and Western Provinces and floods in Eastern and Muchinga Provinces which are some of our major agro producing provinces. This has led to reduced agro production hence reduced agro exports which are key in foreign exchange earnings.

d) Debt Servicing:

With reduced production due to Climate Change, low commodity prices, electricity deficit and the Covid-19 the cost of debt servicing has gone up. This has a direct impact on the KWACHA as we spend more dollars servicing debt.

It must be made clear that Zambia’s debt was necessary as we needed money to develop our infrastructure in order to spur economic development.

Contrary to Opposition Propaganda we have borrowed for production and not consumption. We have used the debt money very well and the economic value of our debt is visible for all to see and feel. We have more roads, more universities, more hospitals, more schools, processing plants, improved energy, communication and agro infrastructure among many other things thanks to our debt.

Most importantly our debt levels are within accepted thresholds and we have never defaulted.

By the way there is no single country in the world that has no debt.

Even at the individual level, we borrow, what is important is to use your debt on production and not consumption and that is exactly what we have done.

e) The Central Bank

President Lungu did very well to fire Dr. Denny Kalyalya. It is clear that for five years that our good brother was at Central Bank, he failed to stir a vibrant monetary policy to reduce the volatility of KWACHA.

In case you did not know, the central banks control and manipulate the national money supply: issuing currency and setting interest rates on loans and bonds.

Typically, central banks raise interest rates to slow growth and avoid inflation; they lower them to spur growth, industrial activity, and consumer spending. In this way, they manage monetary policy to guide the country’s economy and achieve economic goals, such as full employment.

It is our founded hope that the new Bank Governor will perform to expectation in line with his mandate.

In conclusion, the issue of the exchange rates is affecting a lot of countries including Nigeria, South Africa, Angola, and others.

We have the tested leadership in ECL and to God be the glory, we as a people will overcome.

The Author is the PF Deputy Media Director

57 COMMENTS

  1. On the whole, PF take time to explain their policies and agenda as a party while putting the country’s welfare first. The problem I have with upnd is that they don’t elaborate how they will improve in what’s already on the ground! For them, it’s remove PF and bally will fix all our problems-question is HOW???? Kindly break it down, donkeys…

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  2. Every year from 1974 Zambians were given one excuse and good reason after another as to why the economy was performing badly. The people in charge never told us what they were doing to arrest the downslide. Little by little we sucked the excuses until by 1990 we were having food riots and shortly after that a movement to change our political system. I hope we are not repeating history. Thank God that now we CAN kick out underperforming governments. If one gives excuses, we can retire them ‘in national interest.’

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  3. Antonio, i agree with the reasons for the cause of death but i think it was unnecessary to explain the issue of debt because the fact is still there that we over borrowed before Covid came in and mismanaged the funds. Now with Covid, we have no room to maneuver. In short we are squeezed my dear brother. Borrowing stililesa manje maborrowingidwe.

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  4. Shut up iwe chimbwi pompwe…what do you know about economics….you’re part of the problem Dunderhead like makaka Kaizar Zulu and Lusambo

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  5. @Zed citizen – answer to your HOW question is simple, not only has ‘bally’ explained it well, but ordinary citizens has done so, MANY MANY times. 1. ba PF stop bu pompwe – when you steal from treasury, the govt wont have money to service debt, buy medicines for hospitals, farm inputs, good roads. All the above negatively impact prosperity of the country
    2. Employ qualified persons to key govt position – avoid tribalism and favoritism in order to increase productivity in the public sector.
    3. Institutionalize good governance. Let our courts, police, etc operate professionally and independently
    4. ……

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  6. Blaming everything on external factors. Not taking responsibility at all even when it comes to debt. Did the kwacha go to borrow the Dollars or you went?

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  7. You have said a lot of nothing my brother. Its just the poor governance of the PF period.
    8/9/2011: $1=7.094
    8/9/2020: $1=19.74
    all under PF misrule!

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  8. Well written…but people don’t eat roads…
    In short the PF has missed the bus.
    The end is near…

    PF must Go…

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  9. Well said Mr. Mwanza, these are kinds of somethings zambians should be discussing on not he will fix it, is anything broken in zambia?.

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  10. QUOTE: In conclusion, the issue of the exchange rates is affecting a lot of countries including Nigeria, South Africa, Angola, and others.

    IN-CHARGE
    $1= 20 KOBO

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  11. Ignorance is bliss! Antonio Mwanza should leave Fiscal, Monetary and Exchange Rate Policies to experts and Economists. Antonio Mwanza has no knowledge and competencies to appreciate the linkage between Fiscal and Monetary Policies and how this link impacts on the Exchange Rate. Expansionary Monetary Policy to finance increased Total Expenditures will lead to a spike in the Inflation Rate and in turn the Exchange Rate especially with reduced forex inflows into Zambia. If the New Governor of BOZ prints the Kwacha like confetti then the Kwacha to the USD Exchange Rate will sharply depreciate. The writing is on the wall.

  12. @Joburg Man: That’s exactly my point. With you upnd donkeys, you’ve believed all the cr@p your leaders have pumped in your heads. How can someone get money from the Treasury and not get caught?? When Levy died, Lusaka had 1 uth for the whole city but today it is surrounded by 5 level 1 hospitals-where do you think the money came from??? When the Courts rule in your favour they are ok, the other way and they are compromised by PF. You wanted the Courts to convict Dr. Chilufya on speculation and without proper evidence, HOW??? For me, I can’t never vote for such inept and hateful opposition!!!

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  13. Just shut the f/up. Monetary policy can’t perform if there is lack of fiscal discipline! You don’t expect the central Bank to perform miracles when government is indisciplined!!

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  14. I was expecting some econometrics to convince us since you say your write up “is purely based on research and empirical data”. But this is kindergarten economics. Just as well we meet at a tavern so we argue all day.Whoever shouts the loudest wins.

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  15. PF should fire this FDD thing before it embarrases them the way Jezebel Legana has done. The two are made from the same cloth!
    This is the quality of write ups you get from University graduates of nowadays, very shallow and myopic analysis! Write-ups not punctuated with solid reference material! This is what you call heresy! Antonio is a Heretic! Let give you well-researched material in the video below:
    https://youtu.be/nXRK_2mogpg
    This is what educated people produce, well-balanced, well-researched material without partisan undertones! We need Fidelity to Facts!

  16. Please do your research, Mines are performing better production wise this year than last year despite the challenges.

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  17. Problem is African countries are so enslaved to the US Dollar that they always use it as a standard to determine the value of their currencies. The Kwacha is NOT even among the 5 fastest depreciating currencies in the world. And in case you did’nt know, the British Pound is among them… and not a single African currency.

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  18. Before independence, the economy was structured to work and benefit a relatively small number of less than 200,000 white people. At independence on 24 October 1964,the eligible population immediately increased to 4,000,000.Per capita incomes plumented,import cover period for reserves reduced and many
    other socioeconomic variables changed within a short period. It is not because the Pound was nicknamed Kwacha

  19. We are where we are now because of Lungu and the people he has appointed to run the country . He has failed to provide leadership during a crisis and over borrowed way beyond the country’s means for projects that have not achieved anything but benefited only those in government .The industrial level of theft public money cannot be ignored .

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  20. Zambians, we need to elect leaders who have some minimum qualifications in Economics otherwise we’ll continue screwing our Livelihoods! ECL and his gang don’t understand basic Economics! BOZ manages money policy and should ALWAYS operate independently of GRZ. However, GRZ is in charge of Fiscal Policy! If GRZ lacks Financial Literacy and Discipline, it impacts the country’s Fiscal Health! Now that there is no independence between BOZ and GRZ operations, we should expect our Kwacha to become worthless than tissue paper soon! This is happening because our PF leaders are acting out of ignorance of how Economics work! A basic understanding of Econometrics is lacking! Tragic!

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  21. You are dull chap…even my dogs had a laugh reading your useless analysis. Admit it we are in trouble …..ask a grade 7 student to explain to you…

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  22. You are a dull chap…even my dogs had a laugh reading your useless analysis. Admit it we are in trouble ..lov…ask a grade 7 student to explain to you…

  23. You are a dull chap…even my dogs had a laugh reading your useless analysis. Admit it we are in trouble …..ask a grade 7 student to explain to you…

  24. Kwacha remained a toddler since it was born in 1964 through Unip and through MMD but immediately the PF took over it began to grow. Became a teenager at 11 during Satas time and then old enough to drink and drive during lungus time when it turned 18. Now very soon before independence it will become a fully grown adult at 21. If PF continue next year we might even see the kwacha attain middle age.

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  25. Before independence, the economy was structured to work and benefit a relatively small number of less than 200,000 privileged whites.At independence on 24 October 1964,the eligible population immediately increased to 4,000,000.Per capita incomes plummeted, import cover period reduced and many other socioeconomic variables changed within a short period.The sudden increase of number of people with equal rights shocked the economics fundamentals.It was not because we nicknamed the Pound as Kwacha

  26. You dont even have to read the whole article this silly boy has written just need to browse at the ressons and laugh out…how this sick silly boy can write with a straight face is beyond me.

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  27. Today I have seen two analyses on the Kwacha: one came in from Chibamba Kanyama and the other from Antonio Mwanza. Our currency is no longer a teenager, but blossomed into a youth, trading at ZMW20 for a USD1.
    While the economist relied on the crude oil “what ifs” and other general assumptions; the media director, however, is more specific and has put it in perspective.
    I hope GRZ works on the inflation rate of more than 15% so the Kwacha buying power is honourably improved in practice.
    A currency with a higher inflation not only pushes up the interest rates but depreciates too.

  28. Very well thought analysis. Thanks comrade for this wisdom unlike the rubbish that comes out of hanthony habwalyas upnd red baboon backside. By the way I am loving your shirt. Just like me walikwata stylo. Outer presentation reflects your inner ability.

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  29. Ever since lungu assumed power , every economic indicators has been doing badly ……every indicator.

    Full time unemployment is now a major feature in lungus Zambia….

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  30. It’s like 2019, drought hits the country and maize goes into shortage, upnd cries national hunger disaster. President explains that climate change and drought is the cause, upnd cries mismanagement and bad governance. FAO says no need for panic as DMMU on top of things and no hunger, upnd cries PF has failed. Then 2020, under normal conditions we hit a historic 3.3m ton bumper harvest, upnd keeps quiet. That’s why we can’t trust a upnd GRZ because they simply have no substance in their policy set up, they don’t know how governance works!!

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  31. Shameful, did this guy really graduate from UNZA or may be from Copperstone Universit? How can someone write up such crap knowing that he doesn’tknow anything about economics?
    So Shameful but then we are talking of someone that is a professional Sebana Wikute but thinks he knows it better than professionals like CK, Fundanga, Dr Musokotwane, Magande, or HH.
    The luttle rat is surely struggling in his job; he might as well learn from his Boss Chanda who just wakes up and starts insulting because he has no brains and doesn’t know what else to say!
    Well tried Chintonio, PF will promote you soon to take over from Sunday. Antioonio!!

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  32. Antonio “mouth for hire” Mwanza, having stolen money does not make you an economist. Even a f00l acts wisely when he remains silent!

  33. Zambia’s currency is second in terms of poor performance globally. I think it is very sad that we can even be comparing ourselves to other Countries. Yes, many countries in the World have been affected by Covid 19. But the Covid 19 will be a lame excuse since Zambia is not one of the worst affected nations in the World. Moreover, Zambia never even experienced a total lockdown. The economic problems for Zambia were already there by the time Covid 19 pandemic posed its own challenges.

  34. The One word explanation for the bad performance of the Kwacha is “incompetence” and that is by the political leadership

  35. KIKIKIKIKI—->>>Kwacha remained a toddler since it was born in 1964 through Unip and through MMD but immediately the PF took over it began to grow. Became a teenager at 11 during Satas time and then old enough to drink and drive during lungus time when it turned 18. Now very soon before independence it will become a fully grown adult at 21. If PF continue next year we might even see the kwacha attain middle age.

  36. You will keep giving one excuse after another but we are not interested. We are sending you back to sender. We are getting a new government. If they also mess up, we will do the same to them.

  37. Zambian Citizen don’t lie please. The project to expand health centers started under Mwanawasa. Lusaka urban funded by JICA started upgrading clinics to health centers. Dr Sinkala (Adjunct Professor at Alabama University) was Director of Lusaka Urban District Health Management and spear headed this project. Check your facts!

  38. Zambian Citizen don’t lie please. The project to expand health centers started under Mwanawasa. Lusaka urban funded by JICA started upgrading clinics to health centers. Dr Moses Sinkala (Adjunct Professor at Alabama University) was Director of Lusaka Urban District Health Management and spearheaded this project (MHSRIP) Check your facts!

  39. Kwacha to a dollar by August 11, 2021 will be K28.
    If Lungi wins ( chance is ZERO%) Kwacha will become Zimbabwean dollar under Mugabe, 1 billion Kwacha to one USD.

    If Lungu loses, 100 percentage certain, Kwacha will stabilise and strengthen slowly.

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  40. …that’s the problem with this PF, approaching complex problems with an overly simplistic way of thinking….from top to the bottom cadre. They are incapable of anything but simplistic thought….take Kaizar Zulu for example…and he was a presidential advisor…I rest my case.

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  41. @Chiluba: Health centres and hospitals differ. Have you been to Chilenje or Matero hospitals and compare those with your upgraded health centres under Mwanwasa?? That’s exactly the fear with a upnd GRZ, they don’t want to recognize what is reality-they may destroy what’s even already existing simply because it was done by PF.

  42. Antonio mwanza AKA Zambian citizen

    What is so difficult in building hospitals with borrowed money that you are failing to even pay back ????????.

    Mean while permanent unemployment is a feature under lungu…….

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