Skepticism over Kwacha appreciation

By Daily Revelation Editor

Economist Yusuf Dodia says the appreciation of the Kwacha against the United States Dollar and other convertible currencies appears to be temporal as there seems to be no figures to support the same.

“The Bank of Zambia has not made any announcements that import earnings are coming to the country and it is too early. I mean you know it changed two days ago, it can change again. One can only comment maybe after a week or two weeks to see what is going on,” Dodia said. “But actually there seems to be no proper explanation for it and that is quite worrying.”

We shall hear what the Bank of Zambia (BoZ) will say about the same during their press briefing today.

Of course any appreciation of the local currency against other major convertible currencies should come as relief given the ravage the rapid depreciations have caused in the economy. The millions out there would hope this appreciation, moving from around K27.4 to K25.2 against US$1 since last week, is here to stay and that more further appreciations will be witnessed because as even the K25.2 rate is too high.

The highest it ever got to before President Hakainde Hichilema assumed office was K23, and the same was treated as a crisis by the Zambian public.

However, much as the news is very welcome, the appreciation comes with the feeling of uneasy joy in that the country has witnessed several sporadic appreciations which have been followed by sustained depreciations since the Kwacha ventured on the downward spiral around October 2022.

Yusuf argues like many others that there seem to be no figures to support the appreciation in terms of increased export earnings and so on and so forth.

If the appreciation is coming about on account of BoZ having pumped money into the economy then that is a very temporal and short-lived mechanism and we can safely predict that in a few days’ time we shall be back to the same rates if not worse. The last appreciation experienced over a month ago when the Kwacha appreciated to the upper K22 was followed by further depreciations which went as far as K27.5, in just over a month.

For those who have not yet appreciated the impact of the appreciations and depreciations of the local currency, they need to look no further than the very high cost of living they are enduring now on account of the Kwacha depreciation. Every trade coming in from outside into this import oriented economy is determined by the Kwacha value against the Dollar and other major convertible currencies, meaning the weaker the Kwacha has become, the more expensive the goods brought into the country have become.

As the cost of goods brought into the country have become more expensive, subsequently the importers and producers have passed on the cost to the consumers, hence the very high cost of living where one liter of petrol is costing K35.56 for instance.

The hope, though skeptical, is that the currency’s recent appreciation will sustain so that the suffering could somehow be mitigated.