Categories: Editor's Picks

Excess Dollar demand devaluates the Kwacha

• The Kwacha has been depreciating because of the excess demand for dollars in the market.
• Supply is very limited for dollars and other major convertible currencies.
• The Kwacha keeps depreciating, and it has continued weakening into this month.

An Economist has attributed the continued depreciation of the Kwacha to excess demand for United States dollars on the market.
Speaking in an interview with Money FM News, Dr. Patrick Chileshe noted that there is high demand for dollars while supply for greenback and other major convertible currencies is very limited.
Dr. Chileshe observed that last month’s depreciation of the local unit was the weakest to the start of 2021 and it has continued weakening into this month.
He said without any intervention, the local currency has continued losing value for quite some time into this year.
“Last month the Kwacha depreciated and I think this has been the weakest start to the year. So what has been happening is that the Kwacha has been depreciating because of the excess demand for dollars in the market while supply is very limited for dollars and other major convertible currencies.”
“So what we are seeing is that the Kwacha keeps depreciating, and it has continued weakening into this month. Practically, without any intervention, we are seeing the Kwacha continue depreciating for quite some time into this year,” Dr. Chileshe noted.
And Dr. Chileshe said the rate of depreciation for the last 4 months has been slower than in the early months of 2020, as the country is currently witnessing a devaluation of between 2 to 4 percent per month, compared to last year when the Kwacha lost value by almost 50 percent.
“What is very important to note is that the rate of depreciation for the last 3 or 4 months has been slower than in the early months of 2020, up to around September. So you find that the pace of depreciation has significantly reduced. ”
“We are seeing depreciation of between 2 to 4 percent per month, which is lower compared to depreciation for last year when the Kwacha lost value to the extent of almost 50 percent,” he observed.
Currently, the US Dollar is buying at Twenty One Kwacha Ninety Three Ngwee and selling at Twenty Two Kwacha Thirty Four Ngwee.

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