THE Bank of Zambia (BoZ) has tightened the monetary policy and increased the statutory reserves as well as policy rate in an effort to support the Kwacha which is currently under pressure.
The Kwacha was yesterday trading at K6.0300./6.0400 at most bureaux de change.
BoZ financial markets assistant director Isaac Muhanga said measures have been taken by the central bank to support the local currency which had been depreciating for a long time.
Addressing journalist in Lusaka yesterday, Mr Muhanga said the policy interventions taken by the central bank would help support the Kwacha as effects arising from the measures would begin to be felt by next week.
Mr Muhanga said growth could only flourish where inflation was tamed and that their mandate was to contain inflation.
And Bank of Zambia director-economics Peter Banda said a number of factors had contributed to the depreciation of the Kwacha, mainly as a result of the strengthening of the United States dollar.
“The USA dollar has strengthened and the reason is that the USA Federal Reserve Bank has decided to reduce the amount of liquidity that it has been injecting through its monetary stimulus programme and we have seen a lot of currencies in emerging economies depreciate against the dollar.
“When you look at the price of copper, at close of 2012, it was hovering around US$8,000 per tonne but in recent time, we are talking about the price being at US$7,100 per tonne so clearly copper being our main export you would expect that supply of dollars would be relatively lower compared to over a year ago,” he said.
He said Zambia had been recording significant growth and imports had also been growing, thereby, a demand of foreign currency and putting pressure on the exchange rate.
Mr Banda said the economy had been growing and that the Gross Domestic Product (GDP) rate over the past years has been nothing less than seven per cent but that with the economy growing, it is expected to spur a significant increase in imports.
“Our fuel import bill has been growing, if you look at the mines, they have been using significant amount of fuels and the economy in general has been using significant amount of fuel; given that scenario our imports have tended to have grown faster than the growth in exports,” Mr Banda said.
Well for BOZ to act, it means that they have seen trouble in their crystal ball. I wonder what Fred Mmembe with his boy George Chellah are going to post on our Fraudulant President’s facebook page about this issue since last time they commented as though they were expects after googling stuff on the internet.
This is actually drama, currency issues are not the president’s area of expertise. They are better left to economist at BOZ. In the meantime , Mmembe and Chellah enjoy your humble pie.
Bambo, this is verbatim or should I say already plagiarized on that so-called Presidential FB site
The chap at BOZ talking about the slight reduction in the price of copper on the London Stock exchange is very incompetent.
The main reason for the shortage of foreign currency is because of foreign contractors building roads and clinics throughout the country. Imagine a two roomed clinic building being constructed by a contractor from India. What this means is that every time any payment is made to this contractor by the govt, they send this money back to India in dollars.
Controlling the allocation of jobs should be a major task for whoever is responsible. Balancing between local and foreign contractors is the answer.
You, sir, @1 (MMD Bootlicker) are an inspiration. I like your erudite arguments. @Luba Kaonde, the problem we have with local contractors is how they resort to underhand behaviors as soon as they are left to their own devices. This is also forcing government to use external help for even trivial projects. I am not generalizing here; we do have excellent local contractors – but a significant attestation confirms this. If this is a contributing factor and you have identified it, what do you think we can do to offer comparable work as locals? Additionally, as a Consultant I like to look for the pluses in the minuses; it might just be time for the NTEs to double their exports while this window is obtaining in their favor. There are other sectors that could take advantage in the midst of this.
The Excuse given for Kwacha’s depreciation is not realistic. BOZ Management is not serious and are controlled by Plot One (SATA & HIS Circus crew). It is saddening to see educated BOZ employees behave as if they are not educated. This Zambian spirit of being reactive is so useless and killing our Country, Be proactive, innovative and suggest measure that will help our People and Country to move forward. I cannot wait for 2016. Enough with Ma rubbish.
Ah ah.I thought the kwacha was just taking a walk.We have people
that are clueless in leadership.Agony
Wow! this but the beginning of the free fall for Kwacha. It will continue to fall until it reaches the level it was supposed to be had Mwanawasa not taken over. I believe the Kwacha will stabilise exactly at the rate of K50 to a £1 by December this year.
PreSata era the Kwacha was trading at £1 to K6.50 now its at £1 to K10.00. This represents a depreciation of 53% in just two and half years(32 months). This implies that the Kwacha is falling at the rate of 1.7% per month on the minimal side. Now factoring in the massive incompetence ,corruption of the PF and US $ panic buying by the business community and individuals, the kwacha will surely reach K50 to £1 by December.
The only to avoid this happening is to boot out Sata and his incompetent PF stooges from running government…
The mains reason for the depreciation is the failure by government to have alternate exports and having incompetent people lead BoZ. The over dependency on copper and no clear direction to diversify our economy is a recipe for disaster. Other factors such as the strengthening of the US $ are secondary
Unfortunately, the Ministry of Commerce, Trade and Industry which should be leading from the front in establishing conductive environment in promoting diversification of the economy has abdicated its scope of existence.
Zambia’s economy is import oriented. Importing everything from breakfast cereals to second hand cars and machinery. This means our manufacturing base is almost nonexistent; surely do we need to import cornflakes and bread? Even cooking sticks or umwinko?
No such thing ever happened at the hieght of the recession when simiar conditions were worse. The problem is simply cluelessness at govt and now (as it appears) central bank levels. I guess we can only wait it out as It will definitely get worse.
It never happened because at that time you had seasoned economists in Musokotwane as Finance Minister and Fundanga as BOZ Governor. These people were neither the tribesmen nor relatives of the appointing officer. They were simply in these Jobs because of their expertise unlike the jokers we have now!
The Zambian economy will only be grown by Zambians doing real work as opposed to relying on foreign investments. Anything else will just be temporal growth (virtual). We need foreign investment but only to supplement our efforts. We have the resources, good weather and trained manpower but we need to put these this together. If you have charcoal, mealie meal, matches, water, and fish, you will not eat nshima until you combine these things properly.
Ok, where is our ‘facebook economist’?? you told us emerging markets currencies like the Kwacha had depreciated because of the USDollar strengthing. Now emerging market currencies like the rand have recouped some recent losses, but the PF Kwacha continues the slide – please explain for us
Very good question @trial. Matter of fact it is clear to see that what the current Fed action has only exposed the weakness of most of the emerging markets’ monetary policies as well as allied economic priorities. In the short term raising interest rates (which are prohibitive already) will encourage money to stay in the country, but at the same time put more pressure on local consumption and economic activity, especially for those relying on imported raw material. I wonder what our ‘FB’ economists will tell us now beyond this… they must admit they may need to do some more swearing ins after firings…
I miss Mushota and Wanzelu’s contradictory posts though insolent ! These are issues to debate on not insults.
This is different from what the president said….???? What have we done to our economy? very soon things will get out of hand and we will be like Zimbabwe
Pastors,please pray for our leaders,they have no clue as to is happening.
Time is always fair. We told you PF supporters, that your party had no economic policies to drive this country into the right direction. You cannot have a party which is built on lies to run the country. The issue of rebasing was another dochi kubeba, as it was a scheme of hiding the truth of the failing kwacha. The truth is that dollar is now costing K6000 and soon it will be at K10, 000. 100% worse off compared to where MMD left the kwacha to a dollar.
I heard when the kwacha was being rebased Bob Sichinga said the kwacha was going to be at par with the dollar. where is Bob Sichinga to explain this?
“Its not a worry” that Kwacha is depreciating, the Finance minister Alexander Chikwanda said. Hypocrisy again, indeed its a great worry because the Kwacha is becoming increasingly worthless every millisecond.
The truth is that, the selling of copper prices is determined by other countries, and why not sell the copper at $8,000 at ton? Your own business but someone tells you to sell at $7,100?
Which country doesn’t want copper? Without copper the world stops, so wake up Zambian leaders.
this is dellusional!! this is thinking like PF before they formed government. it doesnt work like that my brother. that process will take time.
*The Matrix,
You’re just a great problem and if you can’t get the logic, its best you shut your wide mouth closed. Your failure to think critically is a worry, therefore, you shall continue to wallow in absolute poverty because you let the buyers determine the prices of your own business.
Zambia is the best producer of top class copper, hence all countries depend on it. Do consumers have power to say, for example, a bag of mealie meal should cost K30 and the millers obliges to that nonsense? Wake up and determine your own price for the commodities you sell. Its not the customer to impose the buying price dear and this is why majority of Zambians are wallowing in absolute poverty because of your foolish attitudes of being taken for a ride.
Tulo Matrix and when will you ever wake up?
The price is determined by demand or supply. Even in the village, the price of fish or chicken goes up when demand increases or supply decreases.
@ skeleton. no words for you. believe what you want to believe.
*The Matrix,
Is it stones that you have written above? Its a comment. Sometimes read and understand what others are saying and not just jumping off to yap. Accept your wrongs and you will grow up to be a great child.
I’ve already said to you that, its time you begun thinking critically and assess what your fellow bloggers are saying.
Anyway, it okay maybe next time we can agree but not at this point.
Have a productive day and I wish you well.
@ 12.1 the matrix
another 90 days? Result USD 1.00 ZMW 7.50?
@Jungle boy. The forces of supply and demand don’t set the price. Demand, is a dependent variable responding to a number of factors including price. So is Supply.
Get it?
Leave the work to professionals, twapapata.
Like we say ‘since markets are not perfect , there exists the opportunity for making a profit’… too much mis information muchalo, and the thing is it spreads faster than the truth, or mayb its because people are not ready to swallow the truth. Some think just like PF thought that they can control the exchange rate in their backyard. This is a more global issue than politicians will make you think, but its good to believe in something, atleast it keeps you satisfied for a while…
@Matrix. Where have you been since the start of Parliament protests for the constitution?! Your comments are always welcome.
Now back to the exchange rate. Recall, we did spar on this a week or so ago?
The basics as you know is that an exchange rate is the price of a currency. And the price of anything is simply demand and supply curve convergence. The dollar is fetching a high price because of excess Kwacha liquidity in relation to the amount of dollars available.
The overflow of Kwacha emanates from in my view government printing of money i.e. borrowing through treasury bills and subsequent pumping through consumption of goods and services into the economy. The earning capacity of the nation for dollars meanwhile hasnt appreciated much.
I await your take.
@Matrix. In 2011, the Kwacha hovered at around K4 800. And today it has reached a low 0f K6 000 or 25% depreciation.
Wake up from your slumber. You behave like a cheese eating monkey convert.
@Simbwelo? Busy with work. anyway, thats tru excess kwacha is part of the problem.
1) like I said giving civil servants a huge pay hike at once and guese what most went to do?they went to buy imported items e.g cars,lcd tvs,phones.this pushes the demand for USD at the same time government has borrowed money and importing a lot of raw materials this also puts pressure on the kwacha given there are no equal counteracting exports
2) The day to day movement of the kwacha is the nominal exchange rate ( this is simply the ratio of domestic price of taradeable goods to the foreign price of tradeable goods. Government borrowing has little impact on it .
3)Reliability on copper is once again reflecting to be a bad idea due to manipulation. Copper prices do not mirror the exhcange rate anymore
@Simbwelo, fiat currencies wil always adjust to reach an equilibrium that mirrors two impotants things,labor and capital ,by the way these 2things never depreciate. therefor other items hav to adjust ther values.That explains why earning a wage of K50 kwacha in the 1970 was a miracle and earning a wage of usd 100 in 1940 was normal.today these amounts dont even buy you a drink.Point is if the rand is trading at 1usd =3rands and the kwahca is trading at 1usd =6zmw , this does not mirror the tru value of an economy or currency . you hav to take the real exchange rate that is simply multiplying the nominal exchange rate by the ratio of the nominal wages in the 2countries, that will determine the real impact on consumer spending power which leads as to purchase power parity.
@matrix
As usual burying your head in the sand for the sake of receiving bread crumbs from Sata’s table.
The Kwacha will never recover until after 2016 elections when a new credible government run by serious people come to power. Very soon your Sata will ask for help from Zimbabwean BOB how to plead with the Americans to allow us use the dollar also. Other our Kwacha is fast becoming tissue paper.
There is no need to discuss various economic models like the Keynesian and others to convince stooges like @Matrix.
can you stop blaming it on the $, its very simple here we r spending far more than we r earning!solution let us spend within the budget coupled with investment in capital ventures!!!!
Were are you going to get the money for the capital venture?
The so called international Market Manipulates our economies. The statement below confirms how economic imperialism and continued colonialism operates.
Our economists and other professionals needs to learn something and join hands for us to deal with such eventualities.
“When you look at the price of copper, at close of 2012, it was hovering around US$8,000 per tonne but in recent time, we are talking about the price being at US$7,100 per tonne so clearly copper being our main export you would expect that supply of dollars would be relatively lower compared to over a year ago,” he said.
*Juvohabe,
This is what the sheepish Matrix can’t comprehend. Its people like Matrix above, who have failed to think about national interest critically.
Others lead and the likes of The Matrix who follow blindly are stuck in their juggernauts. He is in a cage without an emergency exit.
Bravo to you who is a critical thinker and keep it up.
The statement does not tell us what has caused the reduction in the price of copper. Imperialism and colonialism?? China is now the biggest buyer of copper and the state of its economy may have much to do with the lowered price of copper on the international market.
PF “DOESNT TAKE THE BULL ON its HORNS” Alawys giving an Excuse. We kno how Financial Markets work quite ok, But PF “ve always a blame game with them”.
EXPENSES in ths GOVT r more thn REVENUES fulu stop
Ths is IDIOCY OF its Kind.
jungle don’t blame china, let me educate you there are a lot of factors like inflation which has gone unchecked, then talk about debt ceiling increase that scared investors who don’t want to risk their money to a debt ridden nation, then our human right record has deteriorated, made even worse with constitution be stalled, investors and market forces thrive where there is peace,freedom, liberty and some
predictability
By the way, the debt ceiling was raised from 200 million Kwachas to 13 billion Kwachas. Do you honestly think the excess cash in circulation will still allow you to buy your USDs cheaply? There will have to be a ‘natural adjustment’ as it turns out. The pull back from QE in the States is only exposing some of these moves for what they are as reflected in the exchange rate.
I beg to differ you can’t blame pf for the damage there doing to the economy and the country in general, because these are a group of people who are rude and have always been rude theres nothing new there doing there was never a time they pretended to be something else the lied and lied and a group of idio ts believed there lies now you blame them for lying why not blame yourselves for voting for them
I love MMD they shud be back in 2016 they were called corrupt but money was easy to find business was booming the kwacha was stable mealie meal was affordable fuel was affordable but today things have gone haywire you arent seen anything yet.
Ah ah.I thought the kwacha was just taking a walk.We have people that are clueless in leadership.Agony
I am not an economist. Someone educate me here. The BOZ professionals above, argue that because the economy has been growing, there is more importation of goods. Hence pressure for more dollars. On the other hand there have been less exports. I thought growth meant less imports and more exports? I also though if an economy is ‘growing’ at 7% per annum, the man on the street would have more disposable income? Less poverty? That’s why I have always been irritable with armchair economic theories. I need help.
Harold, growth is calculated in terms of Gross Domestic Product (GDP). GDP does not mean much except it only explains the overall ‘activities’ in the nation. It comprises components GDP = Govt Spending + Business Investment + Consumption + (Export -Import). So if the GDP increases, say, due to Govt spending on stupid projects with borrowed millions, economists will say Zambian economy is growing. But what Zambia needs Harold is ‘sustainable’ growth. This is growth based on stable monetary and fiscal policies with long term objectives. That is to say, govt ought to resist the temptation of printing Kwacha when there is pressure on them to do so and pursue lower taxes to promote investments and savings. No country has ever developed through higher taxes and loose monetary policies.
Satanomics! There is no where for the Kwacha but down to $1 = ZMK6000.00 where it belongs. It may take a few decades to get there but our grand children will surely be talking about re-basement of the kwacha during their time.
@The Matrix,@CommonSense,@Simbwelu
Your contributions give great insight.Your suggested solutions are exactly what the BOZ officials seem to be indicating as per first paragraph of this blog.We should wait and see how they will define “tightening monetary policy and statutory reserves.” and then input from the fiscal side.
These shall be short term solutions however.Long Term solutions must be economic diversification and we must take this window of opportunity when copper prices are still relatively high and the multilateral/bilateral and corporate lending and investments are good.This is were the annual budgets pronouncements and National Development Plans need detailed dissection by bloggers such as yourselves
Sad that the Central Bank can give such a simplistic view of the factors influencing the “Kwacha-diarrhea” . People expect a more detailed and crisp analysis.
Talking abt the crystalball.We’ve bin seeing 2 much of the outside but we demand 2 c the inside.u say the micro-indicators are looking gud, u say u gonna catch the galloping inflation and u say u gonna reduce the gap btwn the richand the poor.
But what do we c? all we c is poverty upon the doors, hyper inflation, high price crisis and many mo of yo prbmz that u yslf created.