EFF PRESS STATEMENT…..
WHY REDUCED INFLATION AND GAINING KWACHA ARE NOT IMPACTING THE COST OF LIVING POSITIVELY
It’s very important to understand fundamentals that cause economic trends. This gives a correct response on how to react to either a positive or negative economic trend. Fundamental and technical analysis are two common words used for those that trade on active stock market. The two theories affects trader’s decisions to buy or sell stocks.
In Zambia, the strength of the Kwacha against the US dollar is something that brings a lot of excitement to international traders and indeed is used as an economic performance indicator by a common man on the street.
However, without understanding why we have a gain or a loss, could lead to serious poor decisions by those who actually involve in international trade, our local traders.
What is interesting in our economy right now, we have a reducing inflation and a stable and gained exchange rate that is actually having less impact on the price of consumers goods. The cost of living is still going up and unbearable.
In actuality, what is expected is the opposite to happen. A reducing inflation and a stabilizing and gaining currency should translate in cheaper goods but it is not our case.
The reason is very simple, our gain in the Kwacha against the US dollar is because of the weakening of US dollar. If you check the US dollar against the Chinese Yen and Rubles from Russia, you would appreciate our explanation.
The UK pound, Euro and Dollar are certainly under pressure as the result of Ukraine-Russia war. Russia is demanding that oil to be bought from their currency, Rubles and not the US dollar. China, India and other countries are buying fuel cheaply from Russia and their currencies are doing fine.
What is happening now, the global economy is deeply being divided into two spheres. The BRICS( Brazil, Russia, India, China and South Africa) against the West. Therefore, going forward, it would be very important to make comparisons of exchange against the emerging currency to determine the performance of the US dollar, especially against the Rubles. For Yen, it’s usually manipulated against the dollar. They always peg it down against the US dollar for cheaper export purposes. Therefore, the Chinese Yen is not good yield stick for purposes comparison against US dollar.
Our Kwacha has been relatively stable the past month and slightly the previous. Hence, any turbulence in major currency, translate in significant changes in Kwacha as witnessed.
Because of our Kwacha gaining on those grounds, the cost of living will still remain high because the prices will still be going up unless we start producing and increase our exports.
What the government should actually be concerned with are the reserves we hold in US dollars which is about $ 2.8 billion. This actually means, losing value stored in US dollars . They really need to pay attention to what is happening in the global market and possess an understanding thereof to find correct response to this new development. Gold reserves will prove better and has always been better from time in memorial.
Hence, with this positive gain that we have, not knowing how long it would last because the fundamentals are not as a result of our own efforts, government should take advantage by encouraging our people to import manufacturing machines. This can be done through reducing tax duty on those items. Thus, this will create possibilities of creating manufacturing jobs in the near future . We hope the trend continues in our favor as a country.
Wherever we want to go, our feet shall take us there.
Secretary General of the Economic Freedom Fighters EFF