• The approval of US$1.3 billion by the IMF simply means that the money will be pumped into the economy.
• Supply of US dollars in the country will increase.
• The Kwacha will appreciate further.

Since the election of President Hakainde Hichilema in August 2021, the Zambian Kwacha has continued to perform well on the back of favorable political sentiments.
The Kwacha, which was one of the worst in 2020, has stabilized to become the second-performing currency in the world.
Following the general elections on 12th August 2021 the Kwacha gained 30 per cent against the US dollar to hit K15.89 per dollar and it went on to record its best year since 2005.
This time around, the appreciation of the local currency has mainly been attributed to good external sentiments arising from favorable outlook for global Copper demand and the International Monetary Fund (IMF’s) decision to approve US$1.3 billion support package for Zambia.
And an Economist says once this money is pumped into the economy, the supply of US dollars in the country will increase, and push the price of the dollar lower , while the Kwacha will appreciate further.
Shabdin Mweemba told Money FM News in an interview that this means that people who are holding on to the dollars are now supplying to the economy for fear that once the IMF’s first payment is done, the Kwacha will be so much stronger, making the demand for the dollar to reduce.

“The approval of US$1.3 billion by the IMF simply means that the money will be pumped into the economy, of course they will do it in phases. That means supply of US dollars in the country will increase and that will push the price of the dollar even lower meaning that the Kwacha will appreciate further.”

“So now even before that money is pumped in, we have started seeing the Kwacha appreciating so this simply means that those who are holding on to the dollars are now supplying to the economy because they fear that once the IMF’s first payment is done, the Kwacha will be so much stronger than the US dollar and the demand for the dollar will go down,” Mr. Mweemba said.

Mr. Mweemba stated that this development will greatly benefit cross border traders because they will be exporting at a cheaper price.

“On the benefits to the country especially for the cross border traders, it simply means that they are exporting at a cheaper price since the price of the dollar has gone down. That has a trickle-down effect in the sense that whatever they import the rate will be lower than when the dollar is higher,” he noted.
In the second quarter of 2022, the Kwacha appreciated by 3.4% against the US Dollar to an average of K17.15.
According to Bank of Zambia, the Kwacha’s strength arose mainly from increased supply of foreign exchange and positive market sentiments arising from stronger prospects of securing an IMF Extended Credit Facility which has since come to pass.
This has made the Kwacha to maintain a positive trajectory not only against the US dollar but other major convertible currencies such as the Great British Pound, Euro and the South African Rand.

The US Dollar is currently buying at Fifteen Kwacha Thirty Four Ngwee and selling at Fifteen Kwacha Sixty Five Ngwee, while the South African Rand is buying at Eighty Nine Ngwee and selling at Ninety One Ngwee.

Consumers are now waiting to see the appreciation of the Kwacha translating into reduced commodity prices on the local market for them to enjoy the benefits of a stronger currency.