Poor policies behind Kwacha slide

Any hope of salvaging the Kwacha from the rapid and unprecedented slide against international currencies will only come about if government improves its economic policies to win back investor confidence.

Opposition National Restoration Party president Elias Chipimo Junior said while injecting huge amounts of foreign exchange into the economy would be an effective way of stabilizing the local currency, there was need for government to look at the underlying factors for depreciation.

Chipimo said there were several factors that could be attributed to the Kwacha devaluation including excessive expenditure against minimal exports in the country.

“This action would not offset the effects of the internal factors such as lack of proper economic policy to maintain people confidence in the government.

It calls for the government to do things with the scope of policy in mind, and avoid making decisions which are politically driven as that would not bring back confidence into the economy,” he said.

He was speaking in response to Bank of Zambia Governor, Michael Gondwe’s announcement that the central bank had injected US$178 million in order to prevent further depreciation of the Kwacha.

Dr Gondwe explained that the likely impact of these relative tightening measures is to assist in reducing liquidity levels and to some extent dampen exchange rate pressures.

But Chipimo said such action like the government’s decision to remove maize and fuel subsidies without stakeholders’ consultation, and the excessive expenditure on public procurements were some of the internal factors which were affecting the strength of the local currency in the world market.

He said while it was helpful to inject huge amounts of forex in the economy, such action would not provide a long term solution to the problem.

Dr Gondwe explained that the likely impact of these relative tightening measures was to help in reducing liquidity levels and to some extent dampen exchange rate pressures.

He said since the beginning of 2014, the Kwacha has depreciated against the US dollar by 7.8 percent to trade at an average of K 5.9406 per US dollar from an average of K 5.5126 per US dollar at the close of December 2013.

The Governor said the Central Bank was committed to ensuring that the exchange rate remained relatively stable and competitive and would therefore endeavor to minimise the exchange rate.

And Dr Gondwe said the implementation of S1 55, the BoZ had brought about some form of transparency in the export markets in their disclosures and reporting cross border transactions.

The Central Bank Governor also revealed that Gross international Reserves have decreased to US$ 2.673 billion at the close of February 2014 from US$ 2.751 billion at end January.

He added, “The decline in reserves was mainly due to foreign exchange sakes aimed at supporting the market and payments related to oil procurement.”

Categorized | Home News

Comments are closed.

Our Sponsor

Jevic Japanese Auto Inspections

Social Widgets powered by AB-WebLog.com.