• Kwacha weakened by 9.4 % against the US Dollar to an average of K20.71 Ngwee in the fourth quarter.
• Rising excess demand continued to characterize the foreign exchange market
• In response the Central Bank scaled up interventions to moderate pressure on the exchange rate.
The Bank of Zambia (BoZ) says the Kwacha weakened against the US Dollar by 9.4 % to an average of K20.71 ngwee in the fourth quarter compared with 3.3 percent depreciation in the third quarter.
Speaking during the Monetary Policy Committee Announcement, Bank of Zambia Governor Christopher Mvunga, said rising excess demand continued to characterize the foreign exchange market due to higher import requirements for petroleum products and Agriculture inputs under the Farmers Input Support Program.
Mr Mvunga noted that in response to the weakening Kwacha the Central Bank Scaled up interventions to moderate pressure on the exchange rate.
“The Bank sold US$ 339.8 million compared to US$148.5 million in the third quarter on a net basis and this included receipts of all statutory tax obligations by mining companies,” he said.
And Mr Mvunga said that credit to the private sector moderated to 8.5 percent in December from 13.8 percent in September 2020 due to strict lending conditions as banks sought to curb elevated Credit default risks.
He however noted that Credit to government continued to grow at a strong pace underpinned by issuance of government securities particularly for procurement of Agriculture inputs under FISPN as well as the clearance of fuel arrears to suppliers .
“This continued to contribute to the sustained strong annual growth in money supply at 46.4 percent as of December 2020,” Mr Mvunga said.
Mr Mvunga further said that demand for government securities weakened as investor appetite reduced.
“Both Treasury Bills and Government Bond Auctions were undersubscribed with the bid amounts falling short of amounts on offer by 20% and 70 percent respectively,” he explained.
He however says that funds raised from the auctions were adequate to cover maturities resulting in a marginal surplus of K0.3 billion.
