Opposition Leader of Patriots for Economic Progress (PeP) Sean Tembo has said that volatility in the exchange rate of the Kwacha against major convertible currencies is actually adverse to the economy as it undermines the ability of business entities and individuals to transact and often attracts significant foreign exchange losses to cross-border traders.
In a statement to the media, Mr. Tembo said that his party had noted with concern the huge volatility in the exchange rate of the Kwacha against major convertible currencies witnessed in the past few days.
He stated that PeP was particularly disappointed with the Bank of Zambia (BoZ) for sleeping on the job and failing to intervene to prevent the huge volatility in the Kwacha exchange rate.
“Between Thursday, July 22, 2021, and Friday, 23rd July 2021 alone, the Kwacha moved from K22.67 to K20.96 to the US Dollar as per BoZ website, which represents a 7.5 percent movement in a single day. It must be noted that one of the key mandates of the Central Bank is to maintain stability in the forex market and to intervene through Open Market Operations where necessary. This is where the Central Bank either sells or buys forex from the open market so as to prevent the Kwacha from over-depreciating or over-appreciating, as the case might be, and therefore keep it stable,” Tembo stated.
Tembo, a Chartered Accountant himself, further noted that the International Monetary Fund (IMF) in its governing rules and regulations defines a stable currency as one which records daily movements of between zero percent and 0.5 percent.
He stated that the 7.5 percent movement witnessed between 22 and July 23 was unprecedented in terms of currency volatility anywhere in the world and is an unequivocal verdict on the lack of competence of the Bank of Zambia and its leadership.
“As Patriots for Economic Progress, we are fully aware of the fact that as we draw closer to the 12th August 2021 general elections, the PF and its government will become more and more desperate and will try to present a cosmetic view of the performance of the economy. This is evidently intended to misled voters so as to create a false perception that the economy is on a path of recovery when in fact not,” he stated.
Tembo lamented that this appetite by the government to falsify the actual poor performance of the economy was now manifesting itself through the manipulation of the Kwacha exchange rate by the Bank of Zambia, among others.
He stated that his party had no doubt that the sudden appreciation of the Kwacha in the past few days was not supported by any fundamentals but was most likely a result of the Bank of Zambia off-loading forex reserves on the open market as it plays its part in trying to mask the poor performance of the economy so as to mislead voters.
“Such an approach is however not sustainable as we shall soon run out of the little forex reserves that we have. The forex volatility is also undermining any prospects of growth that the economy might have had, as it will definitely keep away foreign investors who normally prefer a stable economic environment.
As Patriots for Economic Progress, we wish to take this opportunity to remind the Zambian people to judge the PF government on the basis of the economic hardships that they have been experiencing for the past 5 years as well as the hunger they feel in their stomachs. The electorate should not be misled by these last-minute antics by the government, regardless of whether such antics take the form of sudden and unexplained appreciation of the Kwacha, debt swap, or commissioning non-functional power generation plants,” Tembo stated.
He further stated that it was evident there would be no limit to the acts of desperation that the PF and its government would engage in to window-dress their poor performance for the past five years.
“Indeed, the PF and its government are extremely desperate in their quest for political survival, but the electorate must not allow themselves to be hoodwinked into believing that the economy which has been performing extremely poorly for the past 5 years, has suddenly turned around only days before Election Day,” stated Tembo.