The Bureau De Change Association of Zambia has warned that the Zambian Kwacha risks hitting a record high of K30 per dollar within the course of the first quarter of 2024 if the large-scale mines like Konkola Copper Mines – KCM and Mopani Copper Mines – MCM remain ineffective.
Speaking in an exclusive interview with the Zambian Business Times – ZBT, Bureau De Change Association, President Paul Kalumba said the delay in the full operations of the two giant mines has caused a deficiency of forex earnings, leading to the depreciation of the local currency against major convertibles.
The Kwacha has already hit K27 per dollar as of 25th of January, 2024, and if the situation persists, it may further depreciate, causing immense hardship for the people of Zambia.
Bureau De Change Association President Paul Kalumba said the government needs to move very quickly to get Konkola Copper Mine –KCM- and Mopani Copper Mine –MCM- running if the situation is to improve.
He said if the two mines begin to operate at full capacity, the country’s tax base will grow and exports will go up.
He did note that Zambia is unfortunately a free market economy meaning that the exchange rate is not a controlled rate, but a free floating rate which is market determined. He emphasized that the delay in operationalizing the mines has been a major contributor to the forex problem the country is currently facing.
Kalumba further added that debt restructuring has been another major issue that has contributed to the prevailing situation.
He noted that this will now be the third year of negotiation, and the sooner it can be concluded positively, the better it will be for the country.
“Unfortunately, the powers are not with Zambia, but the creditors and there is a need to continue pushing the issue of debt relief.” He remarked.
The Association President also noted that the amount of maize produced this year will play a major role in determining additional income for the country.
He mentioned that if the ten million tons production rate being advocated for by the president is achieved, it will mean huge exports for the country to earn more forex.
“So we need those things that will earn us forex. Maize is such one commodity that can earn us good forex” said Kalumba.
He however, noted that none of the mentioned interventions can happen overnight hence the country has to brace itself for some difficult times. He said the kwacha is bound to be under pressure for most of the first quarter and may take the whole of the quarter for the benefits to begin showing.
The Association President added that the implementation of the new Bank of Zambia Regulation which requires all exporters to at least receive the money locally will contribute to the positive interventions of more forex earnings. He noted that the intervention has a 90-day window and that the earliest such deposits can come into the country is in the month of March. Kalumba said this means the country will remain exposed in the first quarter as forex demands will remain far higher than what is being receipted. He said if implemented well, the regulation will make a huge difference. “The biggest problem we have had as a country is that even when we are producing very well, it is meaningless if you are exporting and the money is not coming back here,” said Kalumba. He said having a regulation that makes sure the money comes back to the country also helps the Zambia Revenue Authority –ZRA- in tracking earnings for tax purposes.
He is optimistic that the currency will gain ground in the medium to long term, but said that in the short term, the kwacha will still be under pressure which may lead to worse rates than what is being seen now.
He said the kwacha will lose ground to the dollar even more as most of the interventions are three months away at the minimum of yielding results.
