The Policy Monitoring and Research Centre (PMRC) is elated with the continued appreciation of the Kwacha against the United States dollar.
PMRC Executive Director Bernadette Zulu said over the past week, the country has witnessed the appreciation of the Kwacha, the highest in its history at a rate of 5.6 percent from K22.69 on July 12 to K21.41 on July 23, 2021.
Mrs. Zulu said despite the negative impact of the pandemic, notable shifts in the market have triggered the appreciation of the Zambian Kwacha.
“According to the Bank of America, it is anticipated that copper prices could reach as high as US$20,000 per metric ton by 2025 amid the widening supply and demand deficits due to the United States led global economic rebound that would boost demand for metals used in manufacturing and construction industries,” she stated.
Mrs. Zulu explained that the foreign earnings from copper exports are a critical factor that will strengthen the local currency as the global economy continues to recover from the pandemic.
She further said copper will play a big role in the post Covid-19 recovery since countries are looking to permanently shift from fuel combustion powered vehicles to electric powered automobiles meant to reduce global carbon emissions.
Mrs. Zulu explained that at the height of the Covid-19 pandemic in 2020, global economies experienced instability due to reduced trade and restricted movements.
“In the same year, the global economy was projected to contract by 4.9 percent while Zambia’s economy projected a 4.2 percent contraction owing to the pandemic, climate change as well as the volatility in copper prices, which greatly weakened the Zambian Kwacha,” she said.
She said as of December 2019, the Zambian Kwacha was trading at K14.05 before it depreciated to trade at K22.69 against the United States Dollar as of 12th July 2021.
She added that the government’s recent acquisition of Mopani Copper Mines places Zambia in a position to benefit from the higher copper prices on the global market, a situation she said is another notable factor for improved trade volumes.
She added that the appreciation of the Kwacha is further attributed to the improvements in supply associated with the forthcoming International Monetary Fund (IMF) Special Drawing Rights (SDR) allocation.
Mrs Zulu further noted that improved prospects of a formal Extended Credit Facility (ECF) programme with the IMF has attracted growth in the demand for government securities and bonds.
The PMRC Executive Director hoped that the current appreciation of the Kwacha will lead to the reduction in the cost of doing business and consequently a decline in the prices of major commodities.
“The gains in the Zambian Kwacha must be sustained by more investment in the backward and forward linkages in the agricultural sector through the investment in agro-processing, research and development as well as enhanced extension services in the sector as a viable earner of FOREX and driver of the economy,” Mrs. Zulu explained.
“The demand and supply factors that have led to the appreciation of the Zambian Kwacha are as a result of the government’s efforts in achieving macro-economic stability through current account sustainability as enshrined in the Economic Recovery Programme (ERP 2020-2023),” she said.