• For last month the Kwacha continued to trade on the back foot.
• It continued to depreciate largely due to excess demand for the US Dollar.
• It’s difficult to see any ray of hope especially in the short term.
An Economist says the Kwacha continued to trade on the back foot last month as a result of excess demand for the US Dollar.
Dr. Patrick Chileshe tells Money FM News in an interview that the supply on the market has been very limited, thereby mounting pressure on the performance of the local unit against major convertibles.
Dr. Chileshe states that this is because only the Bank of Zambia (BoZ) is able to see most of the flows after government asked all the mining companies to be paying taxes in US Dollars.
“For last month the Kwacha continued to trade on the back foot. It continued to depreciate largely due to excess demand for the US Dollar compared to the Kwacha, the supply has been limited on the market and that is having pressure on the performance of the Zambian Kwacha against major convertible currencies.”
“This has to do with the fact that at the moment, only the bank of Zambia is seeing most of the flows after government did ask all the mining companies to pay taxes in US Dollars,” Dr. Chileshe noted.
And Dr. Chileshe said improvement of the Kwacha will only be seen when the International Monetary Fund (IMF) comes on board, and helping government to sort out some of its debt repayment pressures.
“We believe that with an IMF program on board, that could create evidence in the local currency note and that is going to bring back offshore investors onto the Zambian market, and then that is likely to start slowing down the depreciation of the Zambia Kwacha.”
“But as it stands now, it’s difficult to see any ray of hope especially in the short term, in the medium term we should be able to see the Kwacha rebound especially after the general elections,” he noted.
The local unit has opened the market trading at K22.14 ngwee and 22.57 ngwee respectively.