Categories: Editor's Picks

Kwacha appreciation will not immediately reflect in commodity prices – Economist

• This appreciation does not reflect in the price of goods.
• This has been the trend in the last three months.
• Even when the Kwacha has been appreciating, the price of goods has not been changing.

An Economist says the appreciation of the Kwacha will not immediately reflect in commodity prices on the market.
Speaking in an interview with Money FM News, Trevor Hambayi said business entities will not immediately react to the appreciation of the currency by reducing the price because they do not know how long the stable price will be.
Mr. Hambayi stated that businesses are waiting for government to clearly determine where the exchange rate is going to be using economic matrix in the next three to six months.
He said this is what is going to allow a business to be able to reduce their price because they know where the exchange rate is going to be.
“With regards to the exchange rate, we have seen in the last three weeks that it has appreciated, in the last week it came off the backdrop of the fact that China said we are coming to the table to negotiate and discuss issues around our debt restructuring. This had positive international perceptions which were helping to be able to stabilize the exchange rate and the Kwacha appreciated.”
“From a business perspective, what we have seen is that this appreciation does not reflect in the price of goods, and this has been the trend in the last three months. But even when the Kwacha has been appreciating, the price of goods has not been changing. The reason for this is that from a business environment, a business entity is not going to immediately react by reducing the price because they do not know how long that stable price is going to be. Right now we do not know and this is why you see that businesses tend not to reduce the price of goods even if the Kwacha appreciates and this is what has been driving the high cost of living,” Mr. Hambayi noted.
Meanwhile, Mr. Hambayi noted that the drop in inflation rate for the month of April 2022 from 15.03 percent to 14.01 percent is as a result of lack of liquidity in the market.
“Inflation has dropped from 15.03 to 14.1 percent and that’s a good thing to note. From an Economic perspective, there are a number of things that are kind of misaligned in terms of inflation. What you see is that the inflation has been dropping but the cost of living has been going up. This is obviously a reverse in terms of economic fundamentals. If the inflation is dropping it means the cost of goods should also have been coming down but this is not happening.”
“The inflation has been reducing because we have no liquidity in the market. We have less cash chasing after a lot more goods in terms of supply and demand. So in essence what you see now is that everybody is adjusting in terms of their income expenditure as to how much they are buying to be able to adapt,” he stated.

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