ANALYSIS | Kwacha Gain Pushback & Opposition Narrative

🇿🇲 ANALYSIS | Kwacha Gain Pushback & Opposition Narrative

Zambia’s kwacha has staged one of its strongest rallies in years, gaining sharply against the US dollar and briefly emerging as one of the best-performing currencies tracked by global markets. The appreciation has been driven by high copper prices, tighter fiscal discipline, Bank of Zambia measures to curb excess dollar demand, improved investor confidence and new inflows linked to mining taxes, including settlements now being made in Chinese yuan.

While the gains do not resolve every economic pain point, they reflect deliberate macroeconomic management and a level of economic literacy that is difficult to ignore.

Government has framed the moment as evidence of stabilisation after years of volatility. That claim is not without merit. The UPND administration inherited a fragile economy marked by debt distress, currency instability and eroded confidence. While not all sectors are thriving and household pressures remain real, the policy direction has been largely coherent, anchored in orthodox fiscal and monetary principles. This coherence is precisely what markets tend to reward.
Opposition voices, however, are pushing back.

Among the most prominent is Socialist Party leader Fred M’membe, whose statement on the kwacha has generated mixed reactions. He begins cautiously, acknowledging that “continued appreciation of the Kwacha… is welcome news,” before warning that “too strong a Kwacha is not good and too weak a Kwacha is not good either.” This framing recognises the rally while questioning its implications, particularly for exporters and domestic producers.

M’membe argues that exporters “lose out in Kwacha terms when the Kwacha becomes too strong,” a point that is economically sound. Exporters earning in dollars but paying costs in kwacha do face margin pressure during rapid appreciation. In principle, this risk exists. In practice, however, Zambia’s mining sector is currently cushioned by record copper prices and improved production volumes. At present price levels, exporters are not being structurally harmed by the kwacha’s strength, though the warning is relevant for long-term balance.

On the import side, M’membe notes that a stronger kwacha lowers import costs but may undermine local manufacturing if imports become cheaper than domestic production.
This is also correct in theory. Zambia’s cost of production remains high due to energy, financing and logistics constraints. Yet in the short term, a stronger currency helps contain imported inflation, especially for fuel, medicines and industrial inputs. For households already under strain, this matters.

The broader opposition sentiment that “kwacha gains mean nothing if prices remain high” reflects frustration but overlooks economic mechanics. Exchange-rate appreciation does not instantly translate into lower retail prices. Price pass-through is gradual, shaped by contracts, inventories, taxes and distribution costs. The immediate benefit of a stronger currency is slowing future price increases before reducing existing ones. Without the rally, pressures would likely be worse.

M’membe also questions what is driving the appreciation, asking whether it is “purely economic fundamentals” or central bank intervention. The available facts point to fundamentals supported by policy. Fiscal consolidation, improved revenue flows, mining tax reforms, reserve diversification and credible central bank actions have all played a role. This is not accidental. It reflects an administration that, whatever its political weaknesses elsewhere, understands macroeconomic discipline.

This distinction matters. UPND may not be winning in all areas of governance, and legitimate criticism remains on service delivery and pace of relief. But on economic management, the regime has demonstrated literacy and restraint. You cannot take that away from them. The kwacha’s performance, debt management and rising international approval ratings are not miracles, but it a signal of regained credibility.

Ultimately, the currency rally is neither a cure-all nor a deception. It is a foundation. Whether it delivers tangible relief depends on how stability is converted into investment, jobs and lower costs over time.

M’membe’s caution against complacency is valid. His dismissal of the gains as marginal is less so. The real test now lies not in debating whether the kwacha matters, but in whether Zambia can sustain stability and translate it into lived economic improvement before politics overtakes policy.

© The People’s Brief | Ollus R. Ndomu