By Jane Chanda
Economist Emmanuel Zulu says the recent gain in the value of the Kwacha is artificial and will ultimately lead to a sharp depreciation of the currency in the long run.
His comments came in the wake of the Kwacha’s recent fluctuation in value by 0.3353 and 1.22% to 27.1957 on Thursday, November 28 and 27.5310 in the previous trading session.
In an interview with Daily Revelation yesterday, Zulu noted that the Kwacha’s appreciation was only sustainable when foreign exchange was generated through trade, but unfortunately, the government’s inability to generate sufficient foreign exchange had disadvantaged the local currency.
The economist also pointed out that the increase in the Monetary Policy Rate (MPR) and the Statutory Reserve Rate had a significant impact on the economy.
“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,” he said.
Zulu also highlighted the significant role the exchange market played in driving inflation in Zambia.
He noted that the volatile exchange rate had a negative impact on the country’s trade balance and hindered the achievement of certain economic goals.
“A stable exchange rate is crucial for a country’s economic growth and the current volatility is a major obstacle to achieving our economic objectives,” Zulu said.
He said the instability of the Kwacha had been evident in recent months, with the currency experiencing significant fluctuations this month.
Another economist Kelvin Chisanga noted that the fluctuation in the exchange rate distorted the market, affecting individual companies and the nation as a whole.
Chisanga also explained that the exchange rate had a significant impact on the cost of doing business in Zambia.
“When we look at the patterns of inflation in the country’s projection, we have seen that there’s been spites which emanate through the exchange market,” he said.
The economist further said the budget implementation process was hampered by the challenges of fiscal deficit and resource constraints, which were further complicated by the fluctuation in the exchange rate that made it difficult to achieve certain economic goals, particularly in terms of inflation.
