FINANCIAL market analyst Maambo Hamaundu says the theoretical strength of the kwacha against the dollar is due to reduced economic growth in Zambia.
Of late, the local currency has been buoyant against other major foreign currencies. As of mid-morning on Friday, the kwacha was buying at K9.20 and selling at K9.25.
Hamaundu explained that it was obvious for Zambia, whose wellbeing was mainly anchored on imports, to have an upbeat exchange rate when such imports were low.
The main reason the kwacha is appearing to be strong is because demand has significantly dropped. So, the people who were importing…just carry a survey, even on things like cars, the traffic of people going to Dubai, China or other countries has reduced. We are an import-oriented economy and when there is a slowdown in the economy, in the business of importing, the demand in the forex (foreign exchange) will be low,
said Hamaundu in an interview.
“So, that is what is leading to the kwacha appearing to be gaining strength. Of course, you can look at other measures that have been put in place by the Bank of Zambia but for now, the primary thing is that demand has significantly dropped – people are not importing. This is consistent with the complaint that you generally hear from people that they do not have money. So, if you do not have money, you can’t demand for forex and therefore you cannot import.”