By Daily Revelation Editor
Economist Emmanuel Zulu is questioning the recent gains in the value of the Kwacha and describing the same as artificial, which he says will ultimately lead to a sharp depreciation of the currency against other major convertible currencies in the long run.
Over a week ago, the local currency depreciated rapidly, and was trading at over K28.5 from around K27.5 to US$1, before making a sharp appreciation to an average K27.6. The fluctuation in value was by 0.3353 and 1.22 percent to K27.19 on Thursday, November 28, 2024 and K27.5 in the previous trading session.
“What we are having is the intervention of the Central Bank among other factors. The Monetary Policy Rate has been raised, the Statutory Reserve Rate has been increased by nine percent, something which has not happened in a long time, so that is quite huge,” said Zulu.
The economist is warning against the artificial gains in the Kwacha as the same may instigate further depreciations of the local currency. It’s fair to say that the Central Bank has tried to use every monetary policy instrument in their books to almost saturation point to address the depreciating Kwacha, which despite some temporary appreciations here at there, can safely be said to have been on a slippery slope since around October, 2022. It’s also fair to say that despite the efforts from BoZ, the same have not been enough to stabilise the local currency against the other major convertible currencies, resulting in some devastating outcomes, such as a rise in inflation (the cost of goods) and with that the worsening cost of living.
If the economists are warning that the intervention of BoZ has resulted in an artificial appreciation, which is likely to result in further depreciations, then Zambians must brace themselves for more problems occasioned by the same weakening Kwacha. Given the scenario, people can only with the feintest of hopes, hope that the overstretched monetary policy instruments will this time around hold to stabilise the Kwacha, thereby stemming further price hikes in fuel and other necessities in the economy, during this very difficult period for the people of this country.
One would hope that the government would come up with more sound policies to spar growth and production to provide the much-needed relief to monetary instruments from the BoZ. More will be required to boost production in agriculture, energy, mining – including increased revenues from the same mines, manufacturing and increased government spending in critical sectors. This should be treated as a priority as the government cannot surely expect an over 6 percent growth projection having to rely on monetary policy instruments alone.
Related
By Daily Revelation Editor
Economist Emmanuel Zulu is questioning the recent gains in the value of the Kwacha and describing the same as artificial, which he says will ultimately lead to a sharp depreciation of the currency against other major convertible currencies in the long run.
Over a week ago, the local currency depreciated rapidly, and was trading at over K28.5 from around K27.5 to US$1, before making a sharp appreciation to an average K27.6. The fluctuation in value was by 0.3353 and 1.22 percent to K27.19 on Thursday, November 28, 2024 and K27.5 in the previous trading session.
“What we are having is the intervention of the Central Bank among other factors. The Monetary Policy Rate has been raised, the Statutory Reserve Rate has been increased by nine percent, something which has not happened in a long time, so that is quite huge,” said Zulu.
The economist is warning against the artificial gains in the Kwacha as the same may instigate further depreciations of the local currency. It’s fair to say that the Central Bank has tried to use every monetary policy instrument in their books to almost saturation point to address the depreciating Kwacha, which despite some temporary appreciations here at there, can safely be said to have been on a slippery slope since around October, 2022. It’s also fair to say that despite the efforts from BoZ, the same have not been enough to stabilise the local currency against the other major convertible currencies, resulting in some devastating outcomes, such as a rise in inflation (the cost of goods) and with that the worsening cost of living.
If the economists are warning that the intervention of BoZ has resulted in an artificial appreciation, which is likely to result in further depreciations, then Zambians must brace themselves for more problems occasioned by the same weakening Kwacha. Given the scenario, people can only with the feintest of hopes, hope that the overstretched monetary policy instruments will this time around hold to stabilise the Kwacha, thereby stemming further price hikes in fuel and other necessities in the economy, during this very difficult period for the people of this country.
One would hope that the government would come up with more sound policies to spar growth and production to provide the much-needed relief to monetary instruments from the BoZ. More will be required to boost production in agriculture, energy, mining – including increased revenues from the same mines, manufacturing and increased government spending in critical sectors. This should be treated as a priority as the government cannot surely expect an over 6 percent growth projection having to rely on monetary policy instruments alone.
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