WHY A STRONG AND STABLE KWACHA IS KEY TO REBUILDING OUR ECONOMY

By Alexander Nkosi

If a tonne of fertiliser is $1000, when kwacha is trading at K22.5/$, you need K22,500 to buy it. If kwacha appreciates to K16.5/$, you will need K16,500. This logic applies to machinery and other inputs required in production, as well as consumer goods. We need to produce more to grow our economy. To produce more, we need to import equipment and other inputs that cannot sourced locally. The cost of importation goes down when kwacha appreciates. Zambia also imports a lot of consumer goods. Hence a strong kwacha lowers the cost of production and cost of living.

What makes our kwacha strong? When we get more dollars into the economy and lose less. How do we get more dollars into the economy? Through: (i) high copper earnings arising from high prices, (ii) increased inflow of dollars through remittances and investment (iii) IMF $1.4 concessional loan. How do we lose less dollars from the economy? We lose a lot of dollars when we pay foreign debt. Restructuring debt will reduce the annual debtb service outlays.

All these are hinged on the IMF deal and hence it is an important step in rebuilding our economy.

Thank you and wishing you a prosperous 2022!

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