By Isaac Zulu
Private Sector Development Association chairperson Yusuf Dodia has described the current appreciation of the Kwacha against major convertible currencies as artificial.
In an interview, Dodia said that the current appreciation of the Kwacha is an indication that the money market is being affected by external mechanisms, saying this is not sustainable.
“In the last two months or so we have seen the Kwacha shift aggressively against the dollar to as low as K15 per dollar and as high as K21 per dollar. And we have seen that sometimes the Kwacha is getting stronger and at times it is getting weaker. Generally, that is an indication that the market is being affected by an external mechanism,” Dodia explained. “Usually the mechanism is that the Bank of Zambia will offload the dollar to the private sector as a way of stabilising the Kwacha just as a temporary measure to avoid people buying huge amounts of dollars. When you buy huge amounts of dollars the Kwacha gets weaker and when you offload huge amounts of dollars, the Kwacha gets stronger. And these are artificial changes, which are not sustainable. The Bank of Zambia releases money so that the Kwacha – Dollar relation remains within K1 to K2 variation and that creates anxiety within the market. The Bank of Zambia has released foreign currency in the banking sector and that is the reason why the Kwacha is appreciating.”
He said that the other mechanism could be attributed to the fact that the corporate world is currently paying taxes and attending to other statutory obligations, which he said makes them to bring in more forex in the country; thereby impacting on the value of the Kwacha.
“The other mechanism is multinational where we have a situation where 80 per cent of our GDP in the nation is created by 20 companies. Ten of which are in the mining sector and the other 10 are in other sectors such as cement production, sugar production, huge commercial farming and exports of vegetables and beef products,” said Dodia. “And when these big corporates realise that this is June, it is the middle of the year, they have to pay provisional taxes, pay quarterly rentals and so on; it means that they suddenly have huge expenses to carter for. And this triggers them to bring more forex in the country. And that also impacts on the value of the Kwacha because there’s an influx of the Dollar, which strengthens the Kwacha. So, for me, these are the mechanisms that are aiding the appreciation of the Kwacha.”
