• The Kwacha has been losing strength as a result of non-availability of FOREX on the market.
• People are consuming goods and other services that are sensitive to the exchange rate.
• Government has been funding its activities using Foreign Exchange reserves.
The Zambian Kwacha has maintained its downward trend, despite several interventions that have been made to strengthen the local unit against major convertible currencies.
Yesterday, the local unit opened the market trading at K17.37 Ngwee and K17.72 Ngwee.
Today, some commercial banks have quoted the currency at K17.45 Ngwee and K17.80 Ngwee on the bid and offer respectively.
According to financial market players, the Kwacha has been recording a fractional weekly loss of about 1.1%.
And Economist Dr. Lubinda Habazoka attributed the persistent depreciation of the Kwacha to heightened demand for dollars on the local market, coupled with dwindling supply.
Dr. Habazoka noted that there is too much demand for Foreign Exchange (FOREX) as most people are consuming goods and services that are sensitive to the exchange rate.
“The Zambian Kwacha has been losing strength against major currencies as a result of non-availability of FOREX on the market. You know this is January when people are preparing to buy school things for their children and businesses are trying to get back after the festive season so they are consuming goods and other services that are sensitive to the exchange rate and basically we have seen that happening,” Dr. Habazoka said.
He further noted that the past three months, government has been funding its activities using Foreign Exchange reserves, thereby contributing to the increase in the value of the Kwacha which has since declined because the International Monetary Fund (IMF) Jubilation has finished and the Kwacha has gone back to its reality.
“And also we have to understand that the past three months have seen government fund its activities using Foreign Exchange reserves and that contributed to the increase in the value of the Zambian Kwacha. Fortunate enough that has slowed down a bit, the IMF Euphoria has finished and the Kwacha is facing reality so that reality is reflecting in the Zambian Kwacha shading off its strength,” he noted.
And Dr. Habazoka said the Kwacha will only gain strength if the country will record a good crop harvest, coupled with fund flow from the IMF.
“We need to see how the mining industry will contribute to FOREX. If the harvest is going to be good, coupled with fund flow from the IMF we expect the Kwacha to strengthen,” he added.
During mid-December of 2021, the Kwacha gained strength due to the ongoing IMF staff level agreement which had led to the over-subscription rates that characterized on the government bonds by some offshore investors.