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Sunday, January 16, 2022

Kwacha depreciation this week due to the tight supply of the US Dollars on the market

Economy Kwacha depreciation this week due to the tight supply of the US...

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).”

22 COMMENTS

  1. No mention at all at the effect the hike in the fuel price has caused? The date the price was increased was December 14 or 16 if Im correct and this correlated strongly with the continued depreciation of the Kwacha. In simple words reduce the price of fuel and we will see an immediate appreciation of the Kwacha.

    The govt only a few days ago dropped import tax on fuel to counter the removal of subsidies so it is up to the private sector fuel supplies and ERB to pass this cushioning on to the consumer which will result in lower inflation as the value of the Kwacha for goods and services will gain which will ultimately result in an appreciation of the currency against the USD.

    Key point is reduce the price of fuel.

    Also some banks are deliberately hoarding USDs and in essence…

    6
    4
  2. No mention at all at the effect the hike in the fuel price has caused? The date the price was increased was December 14 or 16 if Im correct and this correlated strongly with the continued depreciation of the Kwacha. In simple words reduce the price of fuel and we will see an immediate appreciation of the Kwacha.

    The govt only a few days ago dropped import tax on fuel to counter the removal of subsidies so it is up to the private sector fuel suppliers and ERB to pass this cushioning on to the consumer which will result in lower inflation as the value of the Kwacha for goods and services will gain which will ultimately result in an appreciation of the currency against the USD.

    Key point is reduce the price of fuel.

    Also some banks are deliberately hoarding USDs and in essence…

    3
    2
  3. Ctn… Also some banks are deliberately hoarding USDs and in essence are speculating which is a financial crime, this is creating a false demand for USDs, they need to be investigated by BOZ and brought to book as their actions are killing the economy.

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  4. The Zambian Kwacha vs USD value has gotten far better than the depressing K23/ 1 U$D that the corrupt Lungu regime got us into.

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  5. Ctn… Also some banks are deliberately hoarding USDs and in essence are speculating which is a financial crime, this is creating a false demand for USDs, pushing the exchange rate up these banks need to be investigated by BOZ and brought to book as their actions are killing the economy.

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  6. By June this year with the IMF running this Country the Kwacha will be at k30 and Zesco, Zamtel, KCM and Mopani will be sold to foreigners by the chief privertization officer. Thanks to the youths who will be still be unemployed.

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  7. #9 Moto. Honest or lack of it is what has killed the African. Just take time to check the Kwacha Dollar graph from January to September 2020. By the time of the election the Kwacha had appreciated so much that instead of you appreciating you started to attribute to it political manipulation. Personally I appreciate things regardless of who is in state house. But I will never praise a political because whatever good he does we pay him or her.

  8. Fuseke my friend. When the kwacha depreciated ever so slightly, you were quick to blame pf. Today you are attributing it to nonsense. You are a f00Iish upnd cadre who I would enjoy chocking and beating up. Upnd has failed and sold us to imf

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  9. Seems like the recently unemployed PF have time to blog. They now never miss any post. Ba opposition!!!! Hahaha. Be productive ba mambala.

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  10. #13 Uko kuponta ukwabula amano. You think anyone who doesn’t praise your party is PF? As for myself I have enough bundles bought with my own in my own country to play on the internet anytime I want. Don’t be like that proverbial man who was eating bitter impwa but pretended he was eating eggs. Things are bad here but you die-hards will either pretend it’s fine or blame the late PF.

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  11. I am not an economist but I have lived long enough to see that the serious depreciation of the Kwacha against the Dollar began when Zambia relinquished control of its major foreign currency earner: the Mines. When we owned the Mines, even with under capitalization, the dollars earned from the sale of our Copper came back to our BOZ unlike now when all earnings from the foreigner-owned Mines are externalized and banked in China and other places save for a few hundred thousand dollars converted to kwacha to pay salaries and local suppliers. In addition, the UNIP administration did not allow silly imports such as tooth picks, Tilapia from China, shoe polish, vehicle and bicycle tires. This greatly helped control the flight of the hard earned dollars to China and other countries. whoever…

  12. When the Kwacha appreciates you’re quick to attribute it to investors’ confidence in the policies of the Hype Hypocrite. Why shouldn’t the opposite be true?. The exchange rate will just be getting worse especially when the mines and zesco are privitised.
    Lets just keep these institutions and work hard on making them more profitable and generate the much needed forex. Lets emulate the national investment portifolio of Rwanda.

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  13. So how will the Central Bank align longterm in view of the Inflation pressures,the scale down of asset purchases and increase in policy rates by major Central banks like the ECB and FEDs. Will out Central Bank review it’s policy decisions to react and positions especially the debt markets and our kwachas in this new normal The situations being described above are they in line with the current trend in our currency of reference the USD and balance sheet of Major Economies Or is it a question of PRODUCTIVITY to increase reserve positioning to management tail head winds solidly

  14. 16 & 17 Very factual. But due to our gullibility we accept it when someone says Kwacha will appreciate after fours hours following my being sworn in…. without questioning the mechanics that influence currencies… you only import, you don’t export so how can you control your currency.

  15. Today gone down again to 17.40. Some ups and downs are normal but not if they go beyond certain margins. We are watching this closely to see how far down it will go and if it will come back up again.

  16. You expect it to trade between 17.40 to 17.65 unless the currency market responds to some new market pricing and the central bank exerts correct transmission policy mechanisms to register positive gains against the sealing USD looking at the policy rates and the rules of the kwacha to the dollar and trades

  17. Some “economic expert” only a few days ago posted an article stating “is Ghana’s economy the right example for Zambia to follow”. In it he stated Ghana hasnt achieved much that Zambia needs to follow. Well as I posted in that comment, let me repeat.

    BOTH COUNTRIES REDENOMINATED THEIR CURRENCIES AROUND THE SAME TIME BOTH AT AROUND 5 TO THE USD, TODAY ZAMBIA IS AT 17 KWACHA OR MORE AND GHANA STILL IN THE RANGE OF 5 CEDIS OR LESS.

    Where is that “economic expert please?”

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