Zambia’s Kwacha is currently in a state of free fall, with various factors contributing to its depreciation. Dr. Situmbeko Musokotwane, the country’s Minister of Finance, attributed the situation to the delayed debt restructuring, stating that “there’s definitely some truth in this. But it cannot be the sole reason for the Kwacha’s free fall.”
Fred M’membe, the President of the Socialist Party, agrees with Dr. Musokotwane, stating that there are several other factors at play. M’membe noted that the appreciation of the Kwacha was previously celebrated by President Hakainde Hichilema and his government as a sign of economic growth. However, the Kwacha has lost value in recent times, reaching a low of K20.70 to the US Dollar, compared to K15.89 under the same government.
M’membe explained that “interest rate increments in the countries where the money, which was being invested in Zambian government securities, was coming from” is causing a flight back of money. As a result, “money is leaving Zambia and being taken to where interest rates are rising and risks are much lower.” Additionally, fluctuating copper and oil prices are also contributing to the Kwacha’s depreciation, with a drop in copper prices leading to less revenue for the government, resulting in a decreased supply of US dollars.
Furthermore, M’membe stated that investment pledges made by President Hichilema have not come to fruition, further exacerbating the situation. “Dubai’s US$2 billion solar energy investment is still not in. FQM’s US$1.2 billion Kansanshi investment pledge is being awaited. And when it comes in, it will be spent elsewhere to buy mining equipment and other supplies. Very little of it will be spent in Zambia to have an impact on the Kwacha,” he said.
Finally, electricity load shedding, which has been a constant problem in Zambia, is also contributing to the depreciation of the Kwacha. “Clearly, the depreciation of the Kwacha cannot be solely attributed to the delay in restructuring Zambia’s debt,” M’membe added.
The government must address these issues and take measures to stabilize the Kwacha’s value to prevent further economic challenges. With various factors at play, stabilizing the currency’s value will not be an easy feat, and the government must work to implement measures to address each contributing factor.