An economist and financial expert has warned that the current appreciation of Kwacha against the United States Dollar – USD is temporal, unsustainable and may not have a long term positive impact on the ground given the country’s current economic state and weak fundamentals.
The Zambian Kwacha has as of today – Tuesday 20th June 2023 posted serious gains in value against the USD trading from about K19.23 the previous day to about K16.83. The dollar is now buying at K16.8342 and selling at K17.1658 as of Tuesday 20th June 2023 from highs of buying at K19.2306 and selling at K19.6094 respectively as of Monday 19th June 2023.
Reacting to the steep movement, a financial and economic expert has argued that, “I don’t see the Zambian economy being able to sustain it for a long time because you must also take into consideration the fact that right now, Zambia is not paying back (servicing) it’s foreign exchange denominated debt because it is on a debt suspension initiative till the restructuring is concluded and approved.”
Speaking in an exclusive interview with the Zambian Business Times -ZBT, Economist, Researcher and Consultant Salwindi Notulu said although the appreciation of the Zambian Kwacha against the US dollar will have an immediate impact on spot transactions like those settling payments for imported goods and services as this will reduce the Kwacha needed to be converted, the appreciation will have little to no impact on the ground in the medium term.
Notulu explained that this is because of the current balance of reserves that the country has is low, hence the level of sustainability of these gains can simply not be guaranteed.
“Basically what am saying is that if there is any fluctuations in the Supply or demand side on the market, whether they are due to internal or external happenings, those will have an impact in terms of the exchange rates, but in terms of stability in the medium to long term, I would not really be positive that we will be able to sustain it given our current economic situation. So this may just be a one off gain caused by other things happening outside or within the country.”
“From what is obtaining on the ground, I would assume it to be a temporal wind fall and not something that we can say it will continue going down or remain stable. You also need to take into consideration that prices are sticky going downwards but when its going upwards, they are very flexible.”
He added that this may be a short term windfall, so in terms of people on the ground, you can’t really say there will be any effect that will be felt unless it’s sustained over a much longer period of time.
“So this may just be a one off thing and we don’t even know for how long it will last, so only the big companies and large traders who can benefit and take advantage of this, but for ordinary people on the ground, the gains should be sustained over a longer period of time.
