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.
What we need is weekly updates from BOZ team as to what is happening, I suspect a rat with regards to the exchange rate. Some people are benefiting at the expense of the nation as a whole. Who are these people? If you look at the graph of the USD to the Kwacha it has never risen in such a way with absolutely no drop in the past 4 months. I equally suspect PF to be hoarding millions of USD hidden somewhere as they have been completely mute on the exchange rate situation which is strange seeing they are the largest opposition and this matter is of key economic importance.
Engaging China directly to assist us with the debt restructuring program is also key. Lastly the govt needs to be more proactive in helping Zambians to export goods and services. Farmers have grown a lot of soya beans but we haven’t heard of any program from the govt to see that they can export that crop. Neighboring Malawi secured a deal to export 1million tons of soya to Tanzania, but with the floods in that country I don’t see how Malawi will be able to honor the deal. This is where Zambia must step up and clinch that same deal. But silence from the govt in this area is not helping the situation at all. Allow farmers to export to Tanzania and Kenya their soya beans and we will see more FOREX in the nation. Practical steps to earn FOREX but alas no one is listening.
First he agrees with the Minister of Finance then he goes on a rant about investment pledges…these are sick twisted individuals.
ZAMBIAN CURRENCY HAS BEEN IN FREE FALL SINCE INDEPENDENCE
ITS HAD ITS SHORT LIVED UPS AND DOWNS SURE
SO WHATS NEW
HH ??
Kwacha is being deliberately allowed to fall to achieve the following-
1. More tax revenue for the government
2. Promote exports
3. Discourage imports and encourage local production and substitution.
Kwacha shall end up at K26 to a dollar in 6 months’ time
@friend of friend it depends, weak currency will actually result in:
1. Less tax revenue for govt – a weak currency that is affected by an dropping exchange rate makes the importation of goods and services higher, transport and cross border trade go up resulting in less people being able to engage in that economic activity. Look at how farming has been affected due to the high cost of fertilizer.
Ctn…2. A weak currency yes can have the effect of promoting exports as a means to generate FOREX but it can have a negative effect on the scale of exports due to the higher cost of production as the nation still requires imports in key sectors such as mining and agriculture
3. Discourage imports and encourage local production, some items. To set up production facilities you will need to import specialized plant equipment and machinery. NCZ is always halting operations because of key inputs not being available locally.
It was artificial as money was injected to bring
Down the rate.How long can they manage to
Keep putting dollars?
@friend of friend it depends, weak currency will actually result in:
1. Less tax revenue for govt – a weak currency that is affected by an dropping exchange rate makes the importation of goods and services higher, transport and cross border trade go up resulting in less people being able to engage in that economic activity. Look at how farming has been affected due to the high cost of fertilizer.
I agree with Fred that debt restructuring delay is taking a toll on the kwacha and also as he said interest rates in safe havens are rising so investors would rather take their dollars there from here. If you want investors to keep their dollars here then interest rates offered on bonds and treasury bills need to go up. During MMD bonds were yielding up to 100% and kwacha remained steady between K4 to K5 for the 20 odd years that MMD was there.