WHAT’S REALLY HAPPENING TO THE KWACHA?
The appreciation or strengthening of the Kwacha was the Alleluia – glory – of Mr Hakainde Hichilema and his UPND government.
Now that the Kwacha appears to be in free fall what’s their new song. How do they explain it?
Dr Situmbeko Musokotwane, Minister of Finance, says the Kwacha is depreciating due to the country’s delayed debt restructuring.
There’s definitely some truth in this. But it cannot be the sole reason for the Kwacha’s free fall. There are definitely many other factors that are causing the Kwacha to depreciate.
Zambia’s debt is not new, it hasn’t just arisen. The Kwacha was, for some time, appreciating on the back of this national debt burden. It even went as low as K15.89 to the US Dollar under this government. But it is reaching K20.70 to the US Dollar under the same government.
The truth is, there are interest rate increments in the countries where the money, which was being invested in Zambian government securities, was coming from. This is causing a flight back. Money is leaving Zambia and being taken to where interest rates are rising and risks are much lower.
The changes in copper prices also cannot be ignored. A drop in copper prices means less US dollars collected by the government in all sorts of taxes. Oil prices have been rising. This means more US dollars are required to bring in our fuel requirements, putting more pressure on the US Dollar supply and further depreciating the Kwacha.
Also, this situation is not being helped by the fact that the investment pledges Mr Hichilema has been talking about have not come in. For instance, Dubai US$2 billion solar energy investment is still not in. FQM’s US$1.2 billion Kansanshi investment pledge is being awaited. And when it comes in it will be spent elsewhere to buy mining equipment and other supplies. Very little of it will be spent in Zambia to have an impact on the Kwacha.
The impact of electricity load shedding on the Kwacha also cannot be ignored. Clearly, the depreciation of the Kwacha cannot be solely attributed to the delay in restructuring Zambia’s debt.
If Dr Musokotwane were right, then what would happen to the Kwacha if this debt restructuring totally failed? What other options are there for Zambia under Mr Hichilema’s UPND government rule?
Fred M’membe,
President of the Socialist Party