The Bank of Zambia (BOZ) says it cannot state at which exchange rate the Kwacha will stabilize and settle at against the US dollar. This follows a period of rapid appreciation of about 30% within four weeks that has caused mayhem for both importers and exporters as far as planning is concerned.
When asked to at least share a projected range were the Kwacha to US dollar exchange rate pair would settle by the Zambian Business Times – ZBT, BOZ Governor Christopher Mvunga said the market dynamics will dictate where the rate will eventually sit as the country has a free floating exchange rate system.
Mvunga said the central bank does not hold or dictate the exchange rate but it may intervene to ensure price stability.
Speaking during the Monetary Policy Committee Announcement and Press Briefing, Mvunga said the bank of Zambia sells US dollars when there is a shortage on the market and buys the dollars when there is excess supply.
He explained that the country has a Liberal exchange rate regime and a Liberal market therefore only the market can dictate where the kwacha will sit depending on economic dynamics.
“I can’t tell you whether it will be at K5, whether it will be K17, whether it will be K20, I can’t tell you because we have to monitor the market and the market will dictate”, he said.
Analysts have questioned this policy were the Zambian Central bank has adopted to go with the utopian free floating regime which some have described as academic proposition rather than a practical method.
Without a target range, there is no way of holding anyone responsible for whatever rate the Kwacha trades with the dollar. There is need in Zambia to come up with a mechanism were a target range is set and announced so that there is some level of responsibility around the currency expectations.
The newly inaugurated UPND government is on record to have pledged to deliver an exchange rate of at least K10 per US dollar. From the the four weeks appreciation run so far, it looks more viable that Zambia may get back to a single digit trading exchange pair between the Kwacha and the US dollar.
