By Merlyn Mwanza
The Kwacha is inching closer towards the K20 against US$1 psychological barrier.
The currency which saw some brief appreciations in April and a portion of May 2023, after months of depreciation starting around October 17, 2022, is now back on the slippery slope against the Dollar.
Recent interventions in the monetary policy from the Central Bank, including increments in the monetary policy have not had the desired effect in stabilising the local currency.
Private Sector Development Association chairperson Yusuf Dodia had warned in April that the appreciation of the Kwacha against major convertible currencies was temporal.
Dodia attributed the appreciation of the Kwacha to the Central Bank’s decision to release forex from the foreign reserves into the economy in order to stabilise the local currency.
“If the Kwacha is appreciating because exporters are bringing in foreign earnings in the country and therefore our banks have more foreign currency. And because there’s more foreign currency there’s less demand for forex and the Kwacha has appreciated. Then we are doing the right thing,” said Dodia. “But if the Kwacha is getting stronger because the Bank of Zambia has released forex from foreign reserves into the economy to help the Kwacha stabilise, then it is a temporal solution. It is like putting a bandage on the wound without treating the wound. You are just giving it a temporal relief and after one month or so, you get back to the same problem.”
