Social Economist and Marketer Kelvin Chisanga has attributed the depreciation of the Kwacha noted this week to the tight supply of the US Dollars on the local market amid the negative influence of the Covid-19 pandemic.
According to ABSA Bank daily indicative rates, the Kwacha was on Friday buying the US Dollar at 16.9709 and selling at 17.2963.
The local currency opened the week trading between 16.7479 and 17.0690 against the US Dollar.
The Kwacha last made a huge appreciation on 10th December, 2021 when trading between 15.9056 and 16.2105 against the US Dollar.
Commenting on the performance of the local currency, Mr. Chisanga further noted that the industrial recess during the Christmas and New Year holidays has also negatively affected the performance of the Kwacha.
“The performance of Kwacha this week has continued to be on a terrible side of trade and commerce, as it is trading southward. It seems that it has a mild overheating effect impacting almost every day, this is thereby making some nominal losses on an account of tight supply of US Dollars on the local market amidst some lingering negative influence of the Covid-19 pandemic,” Mr. Chisanga observed in a written statement.
“Zambia as a nation, we are coming from industrial break where the economic wheels were slow responding to the market and the month of December has two things that take place thus industrial break and it’s basically an entertainment month, so what we are seeing is the situation where we have high demands now for supply for essential goods and services as we start this particular financial year, then on the other hand, we have some goods that were not fully cleared from third and four quarter of 2021 purchases. So there is a tight supply of US Dollars on the local market (though BOZ has been offloading US Dollars on the market to cushion supply pressure) as the import demand drive is relatively acting up and strongly driving it this way for the local fundamentals on both supply and demands factors,” he started.
Mr. Chisanga said he is looking forward to observing monetary policy direction the Bank of Zambia will announce in the coming weeks.
“So, what we are seeing is that, this effect is clearly showing up in the loss of Kwacha by some small margins (nominal figures say 20 – 50ngwee) almost every day but our consolation should provide that we can see it being offset by an anticipated case of government securities thus through the bonds and treasury which are basically coming up in this first quarter to help salvo some inflationary effects which could perhaps be firmly generating from the exchange rate fundamentals, the moment we let loose FX market (foreign exchange) then we are creating a big problem of inflation which will eventually may make the central bank to come up and hike the policy rate next month in order to fight back this effect quicker but we believe strongly that complex of cases in the economy can also fight this naturally if we play our cards nicely.”
Mr. Chisanga concluded:” The major heavy-lifters in this case for Zambia will be the government bonds and treasury bills during this particular quarter coupled with the copper tax receipts. On the downside risk, we may see a supply-constraint factor for seasonal demands of goods, works and services which may likely to take up this downward route for the Kwacha, though we will keep closely monitoring on the development of inflation, as we strongly believe that there are also some cooling effects since the Zambian economy has many moving parts to interact with, in few weeks’ time we will be having the next set of monetary policy direction by the apex bank (Bank of Zambia).”