Kwacha gains as mines buy local currency to pay off retrenched miners

Kwacha gains as mines buy local currency to pay off retrenched  miners

The Zambian Kwacha has continued appreciation against the USA Dollar due to mining companies buying the local currency to pay off thousands of pruned miners. This and last week, mines offloaded thousands of Zambian miners whoScreen Shot 2015-11-27 at 08.55.17 they are still paying separation packages in local currency.

The government has also continued borrowing and flooding the market with dollars to give an impression that things are okay. Another factor that has made the Kwacha post some gains are sales by companies seeking to pay local salaries and taxes.

The kwacha gained more than 5 percent on Thursday and is likely to remain bullish as companies sell hard currency to pay end month payments due in local currency, according to Reuters.

This morning, the Kwacha was trading between K10: 39 and K10: 60 per USD on the Zambia National Commercial bank

“Corporate sellers continue being seen in the market converting for kwacha to meet month end obligations. However, concerns over Zambia’s copper business which remains at risk due to declining copper prices continues to dampen the outlook for the kwacha in the long term,” BancABC said in a note.

But because the appreciation is not backed by production, once the mines pay off retrenches and a few companies that are paying workers conclude their transactions at the month end, the Kwacha will plummet.

Share this post