Zambian Kwacha remains bearish, despite Central Bank’s heavy hands moderating supply pressure!
By Kelvin Chisanga, Zambian Social Economist +260 97 9305194
This calendar year is undoubtedly a year of invisible wars, bad year playing the cards with offsetting effects amidst standing potential opportunities, though on the negative side, it is almost with comparable aspects in relation to the effects that surrounded around the 2008 global economic crunch or perhaps we can take it with the similar manner characterized with the 2020 Coronavirus (COVID-19) period due to certain uncontrollable effects that the economy is grappling with.
Kwacha has remained bearish despite some strong standing interventions by Bank of Zambia, thereby injecting a total weekly of $ 26.75 million into the local market within last business week, and unfortunately for sometime now the local market on the other hand, has been facing with some unbeatable challenges with the cost pressure in key essential goods amidst dry spell which will also interplay strongly into food issues this year.
Kwacha’s main driving forces still remains on conditions of both demand and supply factors coupled with some market sentiments standing in reasonable base, notwithstanding renewed hope and confidence within the mining sector.
On Monday the 20th February, Kwacha made a strong recovery which was short-lived and was exposed to a sharp ‘flash crash’ which was seen on Tuesday before taking a sudden drop from being bullish.
However, factors leading to the appreciation of Kwacha had a complex aspects ranging from on a number of factors, confidence being built up in the market particularly with the mining investors, as they briefly take off in spending in the economy with mines offloading payments in US Dollars, against the weak Dollar, complimented with statutory tax obligations, with the Bank of Zambia (BoZ) offloading US Dollars on the local market to cushion the supply pressure.
Sadly, to this case as stated in the above, might lead us to make this conclusion that the same way that we saw Kwacha’s appreciation in fast and furious fighting against the power of US Dollar, will be the similar patterns that the US Dollars will hit back this fight in no time due to poor economic fundamentals supporting the local currency’s performance coupled with escalating influences around key basic essential commodities required at most household levels.
Finally, it is quite important to note that the food costs will strongly drive inflation this particular year considering what we are now experiencing with the rains, as the prolonged dry spell will negatively impacting into our food supply factors both locally and regionally.
It will also be ideal to state that the government needs to make a tactical plan around subsidizing food this year, even though this will badly hit into our local forex market fundamentals so terribly since we will be forced to import maize after several years of self feeding and supply”.
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