• Last week the Kwacha continued on a depreciation path.
• This was largely due to excess demand for foreign exchange compared to supply.
• On Friday, Minister of Finance had reached a Staff Level Agreement with IMF.
The Zambian Kwacha has started gaining strength against the United States dollar and other major Global convertible currencies.
An Economist says the local unit is likely to reverse its depreciation trends following the Staff Level Agreement reached between Zambia and International Monetary Fund (IMF).
Dr. Patrick Chileshe told Money FM News in an interview that this is because the IMF deal has been one of the developments that market players have been waiting for.
Dr. Chileshe said once approved by the IMF Executive Board next year, the deal is likely to change the sentiments on the local Market.
He noted that last week, the Kwacha continued on a depreciation trend largely due to excess demand for foreign exchange in the market compared to limited supply.
“Last week, the Kwacha continued on a depreciation path largely because of excess demand for foreign exchange in the market compared to the level of supply.
“However, on Friday the Minister of Finance had reached a Staff Level Agreement with the IMF which was going to translate into an IMF deal once it is approved by the IMF Board next year. So what this implies is that we are likely to start seeing the Kwacha reverse trends because the IMF deal has been of those things market players have been waiting for, for a long period of time, and it is something that is going to change the sentiments on the Zambian Market,” Dr. Chileshe said.
Dr. Chileshe further stated that the local unit is this week expected to continue gaining strength, noting that in the early morning trading, it has already appreciated by 1 percent.
“This week we expect the Kwacha to continue appreciating, just in the early morning trading the Kwacha has already appreciated by 1 percent and we should be able to see it again more as we edge towards the end of the week especially as more investors start positioning themselves to buy part of the Zambian bonds,” he noted.
On Monday, the local unit opened the marketing trading between K17.66 Ngwee and K18.1 Ngwee and closed the day at K17.52 Ngwee and K17. 87 Ngwee.
And today 7th December 2021, the US dollar is buying at 17.32 and selling at K17.67.
Government and the IMF have reached a staff-level agreement on a new arrangement under the Extended Credit Facility ( ECF) for a period of three years from 2022-2025, which will enable Government access $1.4billion.
The staff-level agreement is subject to approval by IMF Executive Board and Zambia has also committed to make bold and ambitious economic reforms.