The Bank of Zambia has depleted the Foreign Exchange Reserves after president Edgar Lungu ordered the central bank to release all the US Dollars, British Pounds and Euros, in an effort to save the junk Kwacha.
The Foreign Exchange Reserves are assets kept by the Bank of Zambia in US Dollars, and other international currencies.
It is important for Zambia or any country to maintain adequate foreign exchange reserves to meet the demand for foreign currency in order to pay for imports of goods and services on an ongoing basis. The Foreign Exchange Reserve is also required to meet other international payment obligations and servicing international debt.
At the start of September 2015, the Bank of Zambia was holding just about US $1.3 Billion in Foreign Exchange Reserves.
But following the the Zambian Kwacha’s ongoing loss of value, president Lungu ordered the Bank of Zambia to release all the money, starting with part of the Eurobond, the money Zambia borrowed for infrastructure development.
Sources say the Bank of Zambia resisted the presidential directive but suggested that they should be releasing only $10 million per month.
But on Monday, September 28, 2015, president Lungu phoned Bank of Zambia governor Denny Kalyalya to follow instructions and release all the money.
Yesterday Tuesday, the central bank released all the Foreign Exchange Reserves and the Kwacha gained some value in the morning but lost ground within two hours.
‘As things stand, there are no reserves at the Bank of Zambia and almost the entire Eurobond has also been consumed, a source told the Watchdog. The source says the impact of the deterioration will be felt by December and next year.
For his part, president Edgar Lungu who just spent $300, 000 to hire a plane to take him and his officials, dancers and other musicians to New York issued another statement that does not even make sense. Lungu continues blaming development in other countries for the economic collapse in Zambia. Its like Zambia is the only victim in what the PF call ‘adverse global economic developments.’
Below is Lungu’s statement from New York:
PRESIDENT ASSURES PUBLIC, BUSINESSES NOT TO PANIC OVER CURRENCY
NEW YORK (Tuesday, September 30,2015) — The Government is concerned with the current developments in the foreign exchange market, where the Kwacha has depreciated sharply against major foreign currencies.
Notwithstanding the adverse global economic developments, the sharp depreciation of the Kwacha is excessive and not consistent with the movements in the fundamental drivers of the exchange rate.
The Government, through the Bank of Zambia, is closely monitoring developments and is taking necessary and appropriate measures to stabilise the exchange rate in order to ensure that it is consistent with the economic fundamentals. These measures will be complemented by prudent fiscal management and
in this regard His Excellency, Mr. Edgar Chagwa Lungu, President of the Republicof Zambia, has directed that increased fiscal interventions be madeto improve the existing economic fundamentals so that there is favourable foreign exchange liquidity in the market.
The Governor of the Reserve Bank has assured the President that variousmeasures are being implemented by the Bank of Zambia. The President is satisfied that the Monetary Policy Committee in consultation with the Ministry of Finance, will continue with measured interventions and monitor market
trends to ensure the foreign exchange market is normalised.
The Head of State wishes to reiterate Government’s commitment to maintaining a liberalised foreign exchange market. The business community and the general public are therefore urged not to panic, as the Government does not intend to revert to foreign exchange controls to shore up the currency and as a measure to cure the speculative distortions.
The President has emphasised that speculative behaviour is therefore unnecessary and market players are urged to play by the rules consistent with the values of a free market economy.
(SPECIAL ASSISTANT TO THE PRESIDENT)
PRESS AND PUBLIC RELATIONS