• The Kwacha performed relatively better in 2021.
• It gained strength by 27 percent against the United States dollar.
• In 2022, the Kwacha is expected to continue performing relatively better.
A recent Bloomberg report indicates that the Zambian Kwacha was the world’s second best performer in 2021.
According to the report, the Kwacha is on track for a world betting year as investors bet on the new government’s chances of securing an International Monetary Fund (IMF) bailout deal and negotiating a debt restructuring.
And an Economist observed that the Zambian Kwacha performed relatively better in 2021 having gained strength by 27 percent against the United States dollar.
Speaking in an interview with Money FM News, Dr. Patrick Chileshe said this was largely due to positive sentiments resulting from the change of government and also the Staff Level Agreement reached between Zambia and the IMF in December last year.
Dr. Chileshe stated that the IMF program which is expected to be approved later this year, helped to reduce the level of negative sentiments on the local market, thereby improving the performance of the currency.
“When it comes to performance, the Zambian Kwacha has been one of the best performing currencies having gained 27 percent in 2021 and that was largely driven by positive sentiments following the change in government and also the achieving of an IMF program which helped to reduce the level of negative sentiments on the Zambian market and that helped to push the performance of the Zambian Kwacha,” Dr. Chileshe noted.
He said the local unit is this year expected to continue performing relatively better than the last 3 years due to the signing of the IMF Program, which will unlock a lot of foreign exchange inflows into the country from offshore investors.
“Coming into this year, we are expecting the Kwacha to continue performing relatively better than the performance it has been in the last 3 years, and the key reasons there again is the signing of the IMF Program, we believe this is going to unlock a lot of foreign exchange inflows into the country from offshore investors,” he stated.
Dr. Chileshe further attributed the Kwacha’s anticipated positive performance in 2022 to Copper prices which have continued performing better on the international market.
He also said the level of reserves are quite comfortable for the Zambian economy, as they are now sitting at around USD2.9 billion, almost equal to about 5 months of import cover.
“We continue seeing commodity prices performing better on the international market and that should be a positive for the Kwacha, especially if the current account balance is going to remain positive going into 2022 that should be supportive of the Zambian Kwacha. So all those factors, do point to the fact that the Zambian Kwacha is going to remain relatively stable with a bias to actually appreciate,” Dr. Chileshe added.
The Kwacha opened the year 2022 trading at K16.51 Ngwee and K16.83 Ngwee, and today January 4th 2022, some commercial banks have quoted the local unit at K16. 54 Ngwee and K16. 85 Ngwee.