A Social Economist Kelvin Chisanga has explained that the kwacha has closed up the month of October in nominal losses despite having strong supply lines of hard currency on the other hand, as the United States Dollar.
Mr Chisanga said that this is because of the high demand placed on the import activities contrasted with the export market, a situation that has led to a hot run on the local currency.
He noted that the kwacha has been exposed to an importer demand drive which has been quite huge and very overwhelming with the supply levers, which were also critically strong at the back of central bank’s weekly continuous market interventions.
“In the short to medium term, during the course of the month, kwacha kept on oscillations between gains and loses but the large percentage was weighing more on the loses as agriculture inputs and fuel have been serious pack of activities into forex trading patterns during the month of October,” he noted
Mr Chisanga mentioned that though, the local and broader market have indicated some serious stabilities, though kept on fluctuating on overnight lending rates between commercial banks, adding that the in the interim, there’s a likelihood to see the kwacha keep on oscillating, but with high chances of posturing stability owing to strong expected supply channels from corporates and slowdown in demand, which is headed to some dry period on forex inflows.
“In the month of November, we may likely see a surgical action on the monetary policy rate in an effort to contain expansionary budget for fiscal year of 2023, so in short we may see a surge in policy rate in order to counterbalance on global inflationary pressures and balancing up of local fiscal expenditures slapped in a 2023 stimulus budget,” Mr Chisanga stated
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This is what is needed, well done Mr Kelvin Chinsanga, this is the kind of economic analysis on the exchange rate that is needed. Not where people wake up and say oh the Kwacha has dropped, we need explanations as to why it has dropped and what the forecasts are for the near and long term future. We need more of this type of analysis.
Keep it up?
Stronger kwacha strengthen imports and weakens exports.
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