Financial Analyst Maambo Hamaundu has attributed the continued plummeting of the Kwacha against the US Dollar the high demand for hard currency brought about by Government’s and private suppliers need to meet their obligations and procure farming inputs.
In an interview with the Zambian Business Times-ZBT, Hamaundu said the local currency was being affected by the country’s level of indebtedness and Governments need to procure fertilizer and other agricultural inputs.
He explained that the laws of demand and supply were now kicking in after the local unit showed an appreciation driven by confidence and sentiments after the 12 August 2021 general elections.
“After elections, there was an appreciation sited on confidence, an appreciation driven by sentiments and now the new government is settling in and the laws of demand and supply are kicking in. Of course, the rate had gone in the wave of appreciation to as low as K15 to K16 per dollar and now it is going up and it appears it wants to settle in the K17 range. Therefore, it is demand and supply at play.
“What is causing this demand is our levels of indebtedness, it is our need to procure fertilizer and other agricultural inputs,” Hamaundu said.
He told ZBT that the desire to meet other government obligations also puts pressure on the exchange rate. Hamaundu stated that “On the other hand where is the forex coming from? It is coming in from the exports of copper, it is coming in from, now we have seen that there is some money which has been pledged by USAID.
He said it is really a question of how are the Government is going to juggle or balance the demand and supply. Hamaundu said this would be dependent on decisions that are being made now by the new Government.
“I will not be surprised personally as we go forward to see the Kwacha gaining more strength or indeed stabilizing because ultimately what we need is not necessarily a very strong currency but a very stable currency that will enable people to plan for their businesses easily,” he said.
The local currency has continued to plummet even further as market continues to face supply headwinds.
According to the Zanaco Bank Plc daily treasury newsletter, the Kwacha continued to drift north from Tuesday’s trading session as market continues to face supply headwinds. The local currency opened for trading at K16.6500/16.600 per dollar and plummeted marginally to be quoted at K16.6800/16.7300 per dollar.
Zanaco Bank indicates that market players will keenly watch out for supply flows that filter through the market today, which ultimately will determine the next USD/ZMW levels. However, as of Thursday, the Kwacha had depreciated further and breached the K17 per US dollar trading pair.
