16% kwacha appreciation rate in one single day is highly questionable – economist
By Margaret Malenga
FINANCIAL analyst Kelvin Chisanga says the sudden appreciation of the kwacha is worrying as it is not backed with any productive fundamentals.
In an interview, Chisanga said the appreciation is not something that is sustainable and that there is need for a balance on measures affecting both exports and imports.
“16 per cent of appreciation rate just in one single day is highly questionable. Obviously, we need the kwacha to appreciate at all possible costs for us to lower a number of effects that we are able to see in the economy, but going by yesterday’s (Tuesday’s) trend and even by what the Bank of Zambia has actually been able to operate for some time, it is something that leaves less to be desirable in terms of trying to see how we can slowly moderate these things,” he said. “Yes, there is an effect that is actually taking place with the forex market and much more of what we are able to see. A resultant aspect in this case is the acceleration of the inflation. But what we need to do is basically get a gradual attention around key aspect of the currency. Much more to look at how best can we work around the policy in terms of supporting the market system ensuring that we also look at the policy that can work around harvesting of dollar. And much of what we can look at as a short term measure in terms of how we should be able to work around kwacha is to accelerate efforts around mining because last year’s reduction of 20 per cent has really given a strong filter through into the forex market, and that’s what we have been having over time. Even when you look at the market pattern for last year, the whole entire year kwacha was not in any way appreciating. All because there was a strong factor that was underplaying into this.”
Chisanga said this will affect people that harvested in dollar investment.
“What we need is inasmuch as we have the effect around depreciation which was taking towards 30 kwacha to a dollar, we should be able to see that even when it comes to appreciation it should not be an instant reaction because the moment we have such, there are people in the market who have actually harvested so much into dollar investment. And also people that have also taken the currency market also to be monitored in a way, and that has actually also got a strong heartbeat around that,” Chisanga said. “And even when you look at the people who are doing cross border trade, if you receive this appreciation of kwacha in a rapid way like this, it means they will start holding on to the goods. Meaning we will create another problem with supply of essential goods. At some point they will have to have a ‘wait and see’ situation. Meaning that the goods that we basically look for especially those essential goods will not be able to reach into the market quickly. They will have to start waiting to see if the market patterns will be able to be faired.”
He however said there is need for a stable local currency in order to push export market.
“The moment we have this rapid appreciation of kwacha, it means we are costing more on the export market and look at what we have as Zambia, that is the only opportunity with the mining product. Meaning the copper output and eventually the export will become very expensive. You are fighting one end but causing the other end to be tough. It has to be an equal balance. Meaning the model of currency performance should start focusing on an equal balance situation – balancing up the export and balancing up the imports. Not where we only balance the import,” said Chisanga.“Right now as we speak, the rapid appreciation of the kwacha is going to be favourable on the import product. Meaning it is going to be cheaper for us to have anything imported to Zambia. But if we are trying to make a very strong balance in this case now, we are creating a problem. Meaning that we will still go back to the high demand for dollar to drive that import process. When you look at the process of export, also meaning we are making it expensive and this is what actually brings the dollars on the market. When we export that’s when we get dollars in the market so we are creating a different market distortion altogether.”-The Mast
Zambians too much complaining
Stop nosense
Which is better leaving it at or over 27 and escalating or having it drop?
So whats this illogical complaint about. Look at America? Do you think for the last 20 yeears they were producing to make their currency strong. It was due to monopoly of buying fuel products using the dollar.
Countries were forced to keep dollars or maitain treasury bills for ease of purchase. Now its all collapsing as countries can buy using thier own currencies.
Point is economic strategic planning can make the difference of winning or lossing. Are you not aware of the investment coming in. Why not use this as an economic strategy to stablize the economy. Don’t you think is a great opportunity to lean on? Lets not play ignorant.
Hence all our friends in America did was print their currency in the billions and hoped everyone continued to use it to buy oils and petrol. See now their debt is over board. It’s over 34 trillion dollars and growing.
Point is what ever is being done to achieve a down ward movement encourage this administration to do more so the Kwacha strengthens. Whats the use of complaining. Does it help us in amny way. Do you want it to remain at an all time high?
One even better if you a have a better solution lets have it. If you have nothing stop this jealousy and let those who want to work continue.
Zambia me l do wonder the way some people behaves, when the Kwacha is not doing well, they are always there complaining and if the Kwacha happens to do better again the same people start complaining, now people what do you want? You are the people who want this government to fail to govern because of your selfishness , give the government space to do what is right for the country please twapapata mukwai.
What is your complaint? You were happy the Kwacha was in free fall?
Every government intervenes when their currency runs into stormy waters.
Even if the relief is temporal, it is better than no action at all.