• Last week, the Kwacha continued with the depreciation trend that started in October, 2022.
• It lost minimal strength by 1.2 percent compared to 1.4 percent the previous week.
• The Kwacha may begin to appreciate during the second half of December 2022.
An Economist has attributed the persistent depreciation of the Kwacha to the high US dollar demand on the interbank market against limited supply.
Gerald Soko told Money FM News in an interview that the demand is seasonal as it is being driven by players in the agriculture sector who are importing their inputs and retailers getting their stocks in readiness for the festive season as well as Oil Marketing Companies who are looking for money to import petroleum products.
Mr. Soko revealed that last week, the Kwacha continued with the depreciation trend that started in October, 2022 and lost minimal strength by 1.2 percent compared to 1.4 percent the previous week.
“But at the same time, support from the Central Bank has been moderate, last week for example, the only came through injecting US$31. 5 million compared to US$75.5 million, but of course what is important to note is that despite reduced support from the Central Bank, the rate of depreciation last week was moderate, it was at 1.2 percent, that is interbank rate, and the other week it was 1.4 percent speaking to the fact that some of the demand appetite from suppliers is beginning to reduce,” Mr. Soko explained.
Mr. Soko further stated that the Kwacha may begin to appreciate during the second half of December 2022, as the Christmas holiday approaches and also going into the new year because there will be less demand for Foreign Exchange as most firms would have gone on industrial break.
“I think as we get to the second half of December, we may see the pressure ease, it started easing last week so obviously as firms also go on industrial break, as you may know that some of the firms are not in operation and so we expect that demand to cool, and so the Kwacha will start depreciating but with minimal levels.”
“And so in the second half of the month as we approach the festive period into the Christmas holiday, and also going to the new year I think that period we don’t expect a lot of demand for FX because most firms would have gone on industrial break and so even demand for FX will have subsided,” he added.