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HomeMarketsZambia’s FX reserves up from 1.6 to 2.1 months

Zambia’s FX reserves up from 1.6 to 2.1 months

Zambia’s Gross International Forex Reserves have increased to US$1.45 billion equivalent to 2.1 months of import cover as at end of December 2019 from the US$ 1.41 billion equivalents to 1.6 months import cover recorded at end of June 2019.

Minister of Finance Dr. Bwalya Ng’andu has announced that the increase in reserves is attributed to net purchases of foreign exchange from the market by the Bank of Zambia and continued payment of mineral royalties in US dollars.

This means that in an event of a major crisis, the country can continue to survive on imports for a period of 2.1 months as there is a buffer for international trade and balance of payment funds. This further means that in situations where there is no any other foreign currency coming into the country for the period of 2.1 months, the country should be able to pay for its key imports such as fuel and any other goods imported from outside the country.

Meanwhile, the Minister also announced that the exchange rate of the Kwacha against major currencies generally depreciated in the third and fourth quarter of 2019 saying this was at the back of heightened demand in the market induced by petroleum, electricity and fertilizer imports, amidst reduced supply of foreign exchange.

Addressing the nation about the country’s economy in Lusaka on February 12, 2020 at Intercontinental Hotel, Dr. Ng’andu has also disclosed that inflation is expected to remain high in the first half of the year on account of the past-through effect of the exchange rate depreciation and the increase in fuel and electricity prices.

He said the rate is expected to start tapering down in the second half of the year due to a reduction in food prices as fresh produce begins coming onto the market. Dr. Ng’andu added that government will continue implementing measures aimed at stabilizing and augmenting external reserves and these measures include reducing outlays on debt service, Bank of Zambia purchase of foreign exchanges from the market as well as purchase of gold as a reserve assert once the process comes to a conclusion.