• The country has more demand for dollars to support importation of various goods and services like fertilizer and fuel.
• Zambia is not producing enough for exports, hence putting pressure on the Kwacha.
• Forex market needs real dollars to come in to match the demand for the greenback.
A Senior Economist has attributed persistent depreciation of the Kwacha against the United States dollar to the continued importation of fuel, fertilizer as well as other goods and services.
Andrew Nsunge Nsunge told Money FM News in an interview that fertilizer and fuel imports are resulting in high demand for US dollars, noting that the country is not producing enough for exports, hence putting pressure on the Kwacha.
Mr. Nsunge Nsunge stated that the local unit has not positively responded to the debt restricting deal because the foreign exchange (Forex) market needs real dollars to come in so as to match with the dollar demand.
“At the moment, as a country we have more demand for dollars to support importation of various goods and services like fertilizer and fuel. So in short, we are not producing enough as a country to export so that we receive dollars and those dollars that will come into the Forex market to match the demand for dollars to facilitate importation.”
“So that is what is causing pressure on the Kwacha. It’s not really an issue of response to the IMF and debt restructuring deal because in the Forex market, we need real dollars to come in to match the demand for the greenback. The fundamentals are the fact that we are still importing fuel, fertilizer as well as various goods and services,” Mr. Nsunge Nsunge stated.
He however said debt restructuring is a positive move as it will help reduce the amount of dollars the country would have been demanding to facilitate repayment.
“On debt restructuring, that was just an agreement, the bilateral creditors reached a point where they agreed to restructure Zambia’s debt. Now that is not a one day process, it is a process that takes time. That in itself is a positive as it will help to lessen the amount of dollars we would have been demanding to facilitate repayment.”
“So that has helped but it is not enough to really make the Kwacha become strong, what will make the Kwacha stable is productivity and exports,” he noted.
The Kwacha has maintained its back foot stance in the Forex market back peddling its gains achieved in few recent weeks, and is currently trading at K20.61 and K21.02 on the bid and offer respectively.