Categories: Business Editor's Picks

Kwacha maintains downward trend

• Kwacha gained strength following news about staff level agreement between Zambia and IMF.
• The sentiments boosted investor confidence in the Zambian economy.
• The local unit has gone back to its depreciation trend.

The Kwacha has continued depreciating against major convertible currencies due to heightened demand for US dollars on the local market.
According to an Economic Analyst, the Kwacha recently gained strength following news about the staff level agreement reached between Zambia and International Monetary Fund (IMF).
Haggai Chomba noted that this is because the sentiments boosted investor confidence in the Zambian economy, that once the deal is finalized, the money will go towards debt restructuring.
Mr. Choomba however observed that now that the news about the IMF deal is fading away, the local unit has gone back to its depreciation trend.
“The most key driver has been the ongoing market sentiments, for the negotiations between Zambia and International Monetary Fund (IMF). Recently, we got a statement from the IMF to say that they have reached a high level agreement with Zambia to be on the program.”
“What this means is that it sends a very good signal to investors and would be investors because we have a lot of debt with international investors both on the market which is the Euro bond which we got and also non market debt, so the agreement with IMF signals to investors that money would go to restructuring of the debt meaning investors don’t expect any default going forward,” Mr. Chomba noted.
He further noted that the Kwacha was one of the best performing currencies when the new government was just ushered into office but as time went on, it started losing strength due to high dollar demand.
“Kwacha was one of the best performing currencies when the new government was just ushered into office but as we went on it started depreciating, it’s really market driven, market fundamentals.”
“So in terms of appreciation of the Kwacha, it’s not yet an intervention because we haven’t gotten the money yet, but sends a signal and its one of the reasons why we have seen the exchange rate appreciating and we will see it appreciate as we get the money because the more dollars we have in the economy, the more Kwacha gains strength,” he added.
Meanwhile, Mr. Choomba said there is less intervention from the Central bank to control the exchange rate, hence the current depreciation.
“We know that Kwacha appreciation is driven by demand and supply for dollars, so when we heard the news about the staff level agreement it appreciated, but now we are going back to our normal level and the reason is that there wasn’t more intervention by the Central Bank to put more money or dollars in circulation.”
The local unit has opened the market today trading between K16.46 and K16.77.

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