• Appreciation of the Kwacha is due to positive sentiments surrounding IMF Staff Level Agreement with Zambia.
• Announcement of Staff Level Agreement has led to oversubscription in bond issuance.
• Investors holding on to dollars have started offloading the currency onto the market.

In the past few days, the country has witnessed a progressive positive performance of the Kwacha against major Global convertible currencies such as the United States dollar.
On Monday 6th December 2021, the local opened the market trading between K17.78 and K17.83 and closed at K17.54 as well as K17.59 against the dollar, 1.57 percent stronger than K17.82 and K17.87 as of Friday 3rd December 2021.
According to Policy Monitoring and Research Centre (PMRC), the current appreciation of the Kwacha is due to positive sentiments surrounding International Monetary Fund (IMF) Staff Level Agreement recently reached with Zambia.
Organization Executive Director Bernadette Zulu told Money FM News that the announcement of the Staff Level Agreement has led to the oversubscription in bond issuance powered by inflows from non-resident investors making purchases of Government securities, thereby leading to an improvement in the availability of foreign exchange.
Mrs. Zulu also noted that investors and other people holding on to dollars and other tradable currencies have started offloading tradable currencies onto the market to buy the kwacha in anticipation of further appreciation of the local unit against the dollar and other currencies.
She added that the Staff Level Agreement on the Extended Credit Facility (ECF) demonstrates positive strides made by Government towards restoring macro-economic stability and improving the basis for further economic recovery.”
“This is not the first time that the country has experienced a rapid appreciation of the kwacha due to an announcement of an IMF deal, as this was witnessed when Government received the US$1.3 billion Special Drawing Rights (SDRs) in August 2021, which saw a sharp appreciation of the kwacha after months of depreciation. With the SDRs, came an increase in the country’s foreign reserves, which helped build external resilience, and supported relative stability in the foreign exchange market, which facilitated foreign and domestic investment flows,” Mrs. Zulu said.
However, Mrs. Zulu noted that while the bond issuance to non-residents has increased foreign exchange inflows for the time being, the measure may not be sustainable in long-term for the stability of the country’s exchange rate.
“Bonds being sold currently to non-residents (foreign creditors) means that there will be outflows in foreign exchange later in future once bonds mature thereby causing demand pressures in the foreign exchange market which will require the country to plan for, to avoid a slump in the depreciation of the kwacha.”
She further pointed out that the sustainability of the kwacha appreciation is important in reducing the inflation rate due to cheaper imports and lower prices.
Mrs. Zulu commended Government for taking a bold decision of reaching the IMF deal in the shortest possible time, as this will go a long way in providing critical budgetary support to the 2022 national budget.
“PMRC hopes that the long term currency appreciation and stabilization benefits will translate into the reduction in prices for major commodities such as fuel and electricity in view of the pending removal of subsidies in these sectors,” Mrs. Zulu added.
On Friday 10th December 2021, the local currency was trading between 15.90 and 16.21 against the US dollar, and in today’s early morning trading, the US dollar is buying at K16.01 Ngwee and selling at K16.32 Ngwee.
On 3rd December 2021, Zambia reached a Staff-Level Agreement on a programme under the IMF’s Extended Credit Facility (ECF) that foresees provision of financial support of US $1.4 billion over three years once approved by IMF Executive board.