The Ministry of Finance has indicated that the continued stability, and the recent appreciation of the Kwacha against the United States dollar to K21.39 as at 23rd July 2021 from K22.64 on 1st July 1, 2021, largely reflects changes in the supply of foreign exchange and broad improvements in market expectations.
The Ministry has further stated that the new developments are consistent with the broad goals set out in the Economic Recovery Programme (ERP), which was launched by President Edgar Lungu in December 2020.
According to a Statement issued to the media last evening by the Ministry of Finance Public Relations Officer, Chileshe Kandeta, the recent developments in the foreign exchange market include factors such as improved foreign exchange flows from the mining sector in view of the strong recovery in copper prices and production.
Mr Kandeta added that this has led to a significant expansion in the trade balance estimated at US$1.9 billion during the period January to May 2021 compared to US$576.8 million over the same period in 2020.
He added that other factors are significant flows from non-resident investors seeking to purchase government securities, evidenced by the oversubscription at 116 percent in the bond issuance held today.
“This has bolstered liquidity in the foreign exchange market and has subsequently led to the substantial reduction in the hitherto excess demand,” he said.
Mr Kandeta also stated that scaled up market support by the Bank of Zambia in view of improved flows from the mining sector is equally another factor.
“Further, there has been a confidence boost in the market following the announcement by the IMF to allocate Special Drawing Rights (SDRs) to its members in August. The SDR allocation is expected to increase international reserves by approximately US$1.3 billion in August,” He stressed.
Mr Kandeta said in addition, the Bank of Zambia has continued with the gold purchase programme through which about US$22 million has been added to the international reserve position.
“With the above developments and continued implementation of the measures in the ERP, the Kwacha is likely to remain resilient,” he said.