The continued free-fall of the Kwacha and volatility of the currency do not mean that the country’s economy is crushing, says Bvank of Zambia governor Dr Michael Gondwe
Dr Gondwe said the Bank of Zambia has no intentions to start interfering with the exchange rate, Central Bank Governor Michael Gondwe has said.
And the Central Bank has said that negative and careless political sentiments had the potential to trigger the depreciation of the Kwacha because such statements could easily scare away both prospective and settled investors
Dr Gondwe said it was economically incorrect for the International Monetary Fund (IMF) to have alarmed the global market that Zambia’s Kwacha was the worst performing currency in Africa because the country’s economic fundamentals had not been affected by the depreciation of the currency.
Dr Gondwe said he was certain that the IMF was not asking the Zambian government to introduce exchange rates as a means of halting the depreciation of the Kwacha.
He stated that Zambia’s exchange rate was liberalized and that there must be no reason to begin to think that government was going to introduce laws to limit the exchange rates.
Dr Gondwe has advised economic commentators to avoid creating desperation among citizens by making frightening economic statements with the potential to scare away investors because the country’s economy was buoyant and sound.
He said it was economically wrong to gauge the economic stability and performance of the country on the rate at which its currency was depreciating that the devaluation of the currency was another means of stabilizing the economy.
“When the currency weakens, it does not mean that the economic fundamentals are out of the moon. When the exchange rate weakens, it does not mean that the economic fundamentals are out of the moon. I am sure that the IMF does not want to see the Bank of Zambia to start fixing the exchange rate. We must understand that the Kwacha has had shocks but we must avoid creating desperation in the economy where people should feel the economy is crushing. The Kwacha has remained relatively strong as to compared to some other currencies in the region such as the Rand of South Africa. People should nor despair that the economy is crushing because on the contrary, it buoyant,’ Dr Gondwe said.
Dr Gondwe said depreciation of the currency was not exclusive to Zambia and that every health economy was likely to suffer from such shocks adding that countries such as South Africa and India had experienced weak currencies but their economies had remained buoyant.
He said if the IMF were as pessimistic as they have come out, about the volatility of the Zambian currency and the general outlook of the economy, they would not have projected that the country’s economy was on the growth path of 7 percent.And BoZ monetary policy senior director Peter Banda careless political sentiments had the potential to negatively affect the exchange rate because such statements could easily scare away investors.Mr Banda said any currency in the world would become vulnerable if the political leadership did not care and mind what kind of statements they were making about the political and economic environment of the country.
“We have negative and positive political sentiments that can affect the exchange rate. Negative political sentiments have the potential to negatively affect the exchange rate because investors can easily be scared away, When there is loss of confidence by the investors, there is a danger that the currency can depreciate. This happens with every currency in the world where foreign exchange rate is left to the free market,” Mr Banda said.